TCS Job Cuts — Investec Says 'No Worries', But Citi Disagrees
The layoffs, focused on middle and senior management, are part of TCS’s broader “Project Fluidity” initiative.
Tata Consultancy Services has decided to cut 2% of its workforce, impacting over 12,000 employees. Two leading brokerages, Investec and Citi, agree on one thing: this move is not about artificial intelligence replacing jobs but a reset to align with evolving business needs.
The layoffs, focused on middle and senior management, are part of TCS’s broader “Project Fluidity” initiative aimed at enhancing agility and preparing for AI-led transformation. The company has clarified that the decision stems from skill mismatches and ineffective redeployment, not cost-cutting or automation.
TCS CEO K. Krithivasan described the move as “one of the toughest decisions” in his tenure, emphasising that the layoffs are not driven by AI but by the need to be “future-ready and agile.” The company has assured that service delivery will not be impacted and that affected employees will receive severance, counselling, and outplacement support.
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Investec On TCS
Investec views the 2% workforce reduction as a non-material event, noting that involuntary attrition of this scale is not unusual in the industry.
“TCS has 613,000 employees, and 2% (12,000) is not material,” Investec wrote. “Companies usually have involuntary attrition rates of 1–2%… this is not unusual.”
The brokerage believes the layoffs are a response to long-standing inefficiencies in managerial structures.
“Over time, the industry has built managerial positions based on tenure… The industry may have taken this action in response to a situation that has gotten worse over time.
Investec estimates a short-term margin impact due to severance costs but expects normalisation thereafter.
“Assuming a three-month severance for people with an average salary of Rs 50 lakh… it would imply a 60 bps impact on margins followed by a normalisation.”
Despite recent valuation derating, Investec maintains a 'Buy' rating on TCS, citing improving deal wins and limited downside risk.
Citi On TCS
Citi takes a more cautious stance, maintaining a 'Sell' rating on TCS and highlighting broader industry challenges.
“We believe there are multiple changes happening at the same time,” Citi further noted, “Productivity asks (AI & otherwise), demand vs. skill mismatches, and pressure on margins.”
The brokerage emphasised that the layoffs are not about reducing headcount but about roles where redeployment has failed.
“Management suggested that these are roles where redeployment has not been effective, and not because TCS needs fewer people.”
The brokerage also flagged concerns about sluggish growth, margin pressures, and macro uncertainty.
“We continue to worry about increased market fragmentation & competitive intensity… Margin pressures are given sluggish growth & the need for investments.”
Citi remains sceptical about near-term recovery, preferring Infosys over TCS in its sector outlook.
