H-1B Visa Suspension:Indian IT Companies To Have Rs 1,200 Crore Impact, Face Marginal Loss In Profit

The suspension of H-1B and L-1 visas by the U.S administration till December 2020 is likely to cost the Indian IT Companies Rs. 1,200 crore with a marginal loss of 25-30 basis points (0.25-0.30 per cent) in their profitability this fiscal, according to CRISIL Ratings analysis of 15 large IT firms.

H1B Visa Suspension Impact On Indian IT


The H1B visa suspension is measured to have a 'marginal impact' on the Indian IT firms also because it concerns to just the new H1-B and L1 visas issued till this year end.

The ratings agency, however, has pointed that the marginal impact will be over and above a 200-250 basis points (2.50 per cent) decline projected due to the Covid-19 pandemic, and will have an impact on the IT firms 'operating profitability' seen at 23 per cent last fiscal.

Microsoft Vows To Help 25 Million Job-Seekers Gain 'New Digital Skills' Required In COVID-19 Economy

Hiring Local Talent

The Indian IT firms have over the last few years gradually reduced their dependence on the H1-B route with denial rates increasing to 39 per cent in fiscal 2020, from 6 per cent in fiscal 2016, and have centered on hiring local talent thus reducing their vulnerability to the H1B visa suspension move and its impact on their operations and profitability.

Confirming the same, Anuj Sethi, Senior Director, CRISIL Ratings says, "New H1-B visa issuances contribute less than 5% of the US onshore workforce of the top 5 listed Indian IT firms, which account for 60% of the industry revenue. On the other hand, the share of local hires in their US onshore employee mix has steadily increased from 30-35% in fiscal 2017 to about 55-60% in fiscal 2020. And with firms aiming to increase the share of local talent, especially with digital skills, the transition impact is expected to be marginal for them."

The US administration has also suggested a transition of the existing H-1B visa issuance from the lottery-based scheme to a merit-based programme to be determined based on the quantum of salary drawn.

USA To Withdraw Student Visas If Classes Move Fully Online

Presuming that the employee requirements under the new visa approvals are in totality met through the local hiring with a 25 per cent premium for the same over the H-1B route, the added cost burden on IT companies may not surpass Rs 1,200 crore, as per CRISIL.

"Additionally, with higher share of employees working from home and with continued restrictions on mobility due to the pandemic, the onshore requirements of IT firms are likely to be lower. Further, IT firms are expected to re-negotiate the onsite requirements with clients until the industry witnesses a recovery in discretionary IT spending," says Sameer Charania, Director, CRISIL Ratings

The ratings agency also does not see much of a material impact on the credit quality of most IT firms, whose financial risk profile is healthy and cash balances adequate to cover employee costs.

For Quick Alerts
For Daily Alerts

Select a Field of Study
Select a Course
Select UPSC Exam
Select IBPS Exam
Select Entrance Exam
Get Instant News Updates
Notification Settings X
Time Settings
Clear Notification X
Do you want to clear all the notifications from your inbox?
Settings X