(Bloomberg) -- Tata Consultancy Services Ltd. reported fourth-quarter profit that trailed analysts’ estimates, hurt by rising costs to hire and retain workers during a pandemic-driven technology boom.

Net income rose 7.4% to 99.3 billion rupees ($1.3 billion) in the quarter through March, the Mumbai-based company said in a statement on Monday. Analysts, on average, had estimated a profit of 100.55 billion rupees.

TCS and smaller Indian rivals are benefiting from a pandemic-induced rush among enterprises to transform into work-from-anywhere organizations, boosting demand for services such as cloud computing. But a talent crunch is making it harder for the IT companies to attract and keep workers, increasing labor costs and weighing on margins. Uncertainty surrounding the war in Ukraine could also weigh on new orders from Europe, which accounts for about a third of the company’s revenue.

TCS, which employs over half-a-million around the world, the bulk of them in India, said sales for the quarter rose 16% to 505.9 billion rupees. Riding the sector boom, TCS and competitors Infosys Ltd. and HCL Technologies Ltd. have been signing on new customers, expanding contracts and bringing on software programmers by the thousands every quarter.

What Bloomberg Intelligence Says: 

“We expect employee attrition to remain elevated, which could make it harder to realize any margin expansion, despite consensus’ 10% sales growth.”

- Anurag Rana, analyst

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Shares of TCS closed 0.3% higher in Mumbai. They are down 1% this year.

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