Mon Jan 19 04:50:00 UTC 2026: # Indian IT Giants Grappled with New Labor Code Impacts in Q3 FY26

The Story:

India’s IT sector is experiencing the financial impact of the newly implemented labor codes. Wipro, the fourth-largest IT firm, reported a Rs 302.8 crore exceptional charge in its December quarter earnings (Q3 FY26) due to these statutory changes. This adjustment primarily reflects an increase in gratuity liability related to past service costs. While Wipro’s CFO, Aparna C. Iyer, anticipates no further significant impact due to the company’s proactive preparations, other major players like TCS, Infosys, and HCLTech have collectively incurred over Rs 4,373 crores in exceptional charges.

These charges have led to a steep decline in profits for the country’s three biggest IT services giants in the third quarter ended December 31, 2025. Despite the industry-wide effect, Wipro also reported a decline in profitability, with consolidated net profit falling both sequentially and year-on-year, despite modest revenue growth and the announcement of an interim dividend. The company posted a consolidated net profit of Rs 3,119 crore for the quarter ended December 31, 2025, down 4 percent quarter-on-quarter and 7 percent year-on-year.

Key Points:

  • Wipro reported a Rs 302.8 crore exceptional charge due to new labor codes in Q3 FY26.
  • TCS, Infosys, and HCLTech collectively incurred over Rs 4,373 crores in exceptional charges related to the same labor code implementation.
  • Infosys reported a Rs 1,289 crore exceptional charge in its December quarter earnings report on account of the statutory impact of new labour codes.
  • TCS reported Rs 2,128 crore and HCLTech Rs 956 crore exceptional charges on account of new labour codes.
  • Wipro’s consolidated net profit fell by 4 percent quarter-on-quarter and 7 percent year-on-year to Rs 3,119 crore.
  • Wipro’s IT services revenue rose 3.3 percent sequentially.

Critical Analysis:

The context clues suggest Wipro’s Q4 guidance is weak, and the shares tanked. However, the context is lacking specific details regarding the labor code changes themselves, it’s challenging to provide a deeper analysis of the long-term strategic implications beyond the immediate financial impact. Further research into the specifics of these labor code adjustments would be necessary.

Key Takeaways:

  • New labor codes in India are having a significant, albeit likely one-time, financial impact on major IT companies.
  • The impact is primarily related to increased gratuity liabilities.
  • While Wipro anticipates minimal further impact, the initial hit affected Q3 FY26 profitability.
  • Investors should closely monitor company performance to see how well IT firms can manage the impacts of the labor law.
  • The market reacted negatively to the news, with Wipro’s share price falling and brokerages expressing caution.

Impact Analysis:

The implementation of new labor codes has both immediate and potential long-term implications for the Indian IT sector. In the short term, companies are facing significant exceptional charges impacting their profitability. This could lead to reduced investor confidence and potential downward pressure on stock prices.

Long-term, these changes could lead to a restructuring of compensation packages and benefits, potentially affecting employee satisfaction and retention. The IT companies may need to revise their workforce management strategies to adapt to these new regulations, which could further impact their operational costs and competitiveness. It remains to be seen whether this is a temporary setback or the start of a new normal requiring strategic adjustments across the sector.

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