This Friday, US President Donald Trump issued the broad strokes of a diktat to boost the charges for H-1B visas from $7,000-10,000 to an eyewatering $100,000. This was clarified later to be a one-time price payable on the time of the petition, relatively than being an annual price. For a three-year visa, this could quantity to $33,333 a 12 months.
Hypothesis was rife that renewals may be in danger, significantly for petitioners who depart the US, and that spouses’ visas might additionally face elevated scrutiny. The US administration has since addressed a few of these considerations, however not earlier than inflicting appreciable panic amongst companies, petitioners, and authorities companies.
Who’re the winners and losers from Trump’s newest diktat? Allow us to discover.
Not simply Indian IT on the firing line
Greater than 70% of the 400,000 H-1B visas issued by the US in 2024 are held by Indians. Indian IT corporations, which derive greater than half of their revenues from exports to the US, have been the biggest sponsors for Indians’ H-1B visas. So, it goes with out saying that the Indian IT companies trade will bear the brunt of Trump’s newest proclamation.
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That stated, because of the STEM (Science, Expertise, Engineering, and Arithmetic) ability hole within the US, US corporations additionally depend upon H-1B visas for specialised roles. The truth is, Tata Consultancy Providers (TCS) was the one Indian firm among the many prime 5 corporations with the biggest variety of H-1B employees. The highest 5 US corporations secured 28,000 H-1B visas within the 12 months ending September 2024, in comparison with nearly 24,000 visa petitions accepted for the highest 5 Indian IT corporations within the calendar 12 months.
Which means that within the close to time period, US corporations will even wrestle with challenge delays and price run-ups as they scramble to rent, prepare, and compensate new domestically employed workers. In the long term, artificially imposed controls on expertise would deter innovation, which might maintain the US again in its race for innovation in opposition to China.
Such has been the panic amongst US corporations that J.P. Morgan, Microsoft, and Amazon have promptly issued advisories asking their workers on H-1B visas to remain within the US. If visiting different international locations for work or trip, it’s steered to return earlier than the brand new visa guidelines take impact on 21 September.
Damned in the event that they do, damned in the event that they don’t
The following few months shall be fraught with enterprise uncertainty for Indian IT gamers. Corporations have 4 choices: pay the exorbitant visa charges for onshore Indian workers, shift work offshore (again to India) or nearshore (e.g., Canada), or exchange onshore Indian workers with native hires within the US.
Contemplating that the brand new visa charges are a few fifth of the common annual wage of onshore workers, the primary choice would severely impression margins. The impression can be starker if employers have been to cowl entry-level workers. If shoppers don’t insist on co-location, work might be shifted offshore or nearshore. However offshoring would pit IT corporations in direct competitors with cost-competitive international functionality centres (GCCs), and shoppers could choose onshoring over nearshoring. This might result in a slowdown in deal wins for firms that go for offshoring or nearshoring US-based initiatives.
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Some shoppers could insist on co-location for initiatives requiring area of interest and specialised companies. This is able to rule out offshoring and nearshoring, forcing corporations to rent US-based workers. Nonetheless, estimates place their cost-to-company at $20,000-30,000 greater than equally skilled onshore Indian workers. Their productiveness can also be presupposed to be decrease on account of variations in working tradition vis-à-vis India.
Contemplating the politically charged nature of the matter, the extent to which shoppers provide to share the rise in prices must be seen. All in all, whichever choice an Indian IT firm chooses, it can both face slower deal wins, margin pressures, or each.
Can this be the nice equalizer between large- and mid-cap IT corporations?
Over the past 5 years, mid-cap IT corporations have proved to be extra agile in an evolving technological and aggressive panorama. As GCCs intensify competitors and AI disrupts long-standing processes, mid-cap corporations have been capable of adapt quicker, because of their project-centred groups and outcome-oriented pricing. This has mirrored of their superior top-line development in addition to outperformance on the bourses, at the same time as large-caps have remained targeted on defending their margins.
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However the greater visa price is more likely to weigh heavier on mid-caps, thus promising to be the nice equalizer. Right here’s why.
Tier-1 IT gamers depend upon H-1B visas for under about 20-50% of their onshore workers within the US, with the accepted visa petitions for preliminary employment having declined by 56% between 2014-15 and 2022-23. Deeper pockets have allowed bigger corporations to pivot in direction of native hiring. Greater than half of Infosys and TCS’s native workers within the US are US-hires.
Because of the broader margins commanded by bigger corporations, subcontracting has labored as a viable different for them. They’ve additionally discovered extra success with establishing supply centres within the US and offshore supply. Managements attribute this to a pandemic-led structural shift in direction of automation and upskilling. Mid-cap corporations, alternatively, have needed to rely extra deeply on onshore supply.
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In fact, this will also be attributed to how tier-1 IT majors are inclined to concentrate on conventional IT companies, whereas mid-cap majors usually present engineering, analysis, and improvement (ER&D) companies. Purchasers availing area of interest and specialised ER&D companies usually tend to insist on co-location. As the upper visa charges kick in, co-location will develop into much more costly for mid-cap gamers, eroding their already skinny margins.
That stated, bigger corporations might see deal slowdowns and, consequently, sluggish top-line development in the event that they cut back onshoring additional. Furthermore, as US corporations lean extra on GCCs for his or her IT wants, GCCs can find yourself stealing extra market share from each large- and mid-cap IT corporations.
Backside line
There are hardly any winners from the hiked visa charges. In response to immigration adviser Fragomen, Trump’s visa proclamation might find yourself getting challenged in a courtroom of regulation. This won’t be the primary time both. Trump’s different diktats have additionally confronted authorized hurdles—the legitimacy of his tariffs has been questioned, and his makes an attempt to take away a Fed governor and finish birthright citizenship have been blocked.
Whereas this stokes hopes that the judiciary might block the visa proclamation, it provides a layer of uncertainty to the hiring and enterprise methods of impacted corporations. Uncertainty can also be led to by how the US has reserved the precise to exempt people, firms, and industries from the excessive visa charges if they’re discovered “within the nationwide curiosity”.
NASSCOM is assessing the impression of the proclamation. India has resumed talks to revive the commerce deal that had halted over current tariff escalation. So, the visa drawback might additionally discover a reprieve by way of worldwide diplomacy. Over the long term, nevertheless, the issue shines the highlight on the pressing want for India’s IT to upskill, improve innovation focus, and diversify.
For extra such evaluation, learn Revenue Pulse.
Ananya Roy is the founding father of Credibull Capital, a Sebi-registered funding adviser. X: @ananyaroycfa
Disclosure: The writer holds shares of a number of the firms mentioned. The views expressed are for informational functions solely and shouldn’t be thought-about funding recommendation. Readers are inspired to conduct their very own analysis and seek the advice of a monetary skilled earlier than making any funding selections.
