Indian IT Firms Reel Under Trump's New H-1B Visa Fee

The move by the US to impose an additional fee on H-1B visa holders has sent shockwaves through the Indian IT industry. Infosys, Wipro, and Cognizant, all ADR-listed on the Nasdaq, saw their shares plummet overnight, with Infosys ADRs dropping 4% and Cognizant declining 4.7%. Experts warn that this will have a significant impact on the profit margins of the sector, with Pareekh Jain, CEO of Pareekh Consulting, stating that if the rule applies to existing visa holders, it could shave 1% to 2% off sector-wide EBITDA margins.

Key Takeaways:

• Expert warnings suggest that the additional fee on H-1B visa holders could have a significant impact on the profit margins of Indian IT firms, with potential losses ranging from 1% to 2% off sector-wide EBITDA margins.
• Pareekh Jain, CEO of Pareekh Consulting, highlights the immediate impact on margin, with companies likely to feel the pinch if existing H-1B visa holders have to renew under the new rule.
• The move will also affect subcontractors and local hires in the US, including Indian students entering the workforce via the H-1B route, leading to increased delivery costs for IT service providers.
• Happiest Minds, a mid-size IT services player, acknowledges that Indian IT companies now face higher costs, but notes that its global delivery model built over 14 years will mitigate the impact.

Statistics:

• Infosys ADRs dropped 4%.
• Cognizant declined 4.7% on Friday.
• Pareekh Jain estimates that the rule could shave 1% to 2% off sector-wide EBITDA margins if it applies to existing visa holders.
• 94% of Happiest Minds' business is driven offshore.

Sources:

• Pareekh Jain, CEO of Pareekh Consulting
• Venkatraman Narayanan, MD and CFO of Happiest Minds
• Times News Network article