American dreams for young Indian software engineers have come down crashing and Indian Information Technology (IT) firms with US exposure bled at the markets on Tuesday after US President Donald Trump administration introduced a legislation to curb other nationals being employed by IT companies.
For young Indian software engineers and IT graduates, H-1B visa is the ticket to America and fulfilment of their dreams to reside in a ‘developed nation’. The legislation introduced in the US House of Representatives asks for doubling the salary of H-1B visa holders to more than $130,000, from the current $60,000.
Statistics with industry body Nasscom (National Association of Software and Services Companies) shows that around 4.11 lakh jobs have been created by the Indian IT companies in the US. Out of this 1.5 lakh IT professionals are employed directly.
Indian IT firms face the risk of higher operational costs and shortage of skilled workers with the proposed overhaul of popular H-1B visa regime, leading to a sharp slide in tech stocks and prompting India to convey its concerns to the US.
Out of the 58 firms listed on the S&P BSE IT index, shares of 55, including that of Infosys, Wipro, Tata Consultancy Services (TCS), Tata Elxsi, HCL Technologies, Tech Mahindra and others tanked on BSE.
The response was such that S&P BSE IT index went down by 5 per cent only to marginally recover later. It had pre-opened at 9881.89 points and went to a low of 9401 only to close at 9586.34, which is 2.96 per cent lower.
Wipro was among the major losers with its share being 7.55 per cent lesser at Rs 457.10 per share. TCS had opened at Rs 2,325 per share only to shed Rs 104.3 and close 4.47 per cent down at Rs 2,229.9. Similarly, Infosys closed at Rs 929.3, which is 2.01 per cent down.
Highest among the top traded stocks was Infosys followed by Tech Mahindra, TCS, HCL Technologies, Datamatics, Wipro, Tata Elxsi, HCL Infosystems, etc.
Sarabjit Kour Nangra, Vice President, Research- IT, Angel Broking said, “Hike in H-1B visa cost will have significant impact on the financials of the company, as Indian companies while are major users of H-1B visa (according to reports around 85 per cent), though they form very less part of the overall workforce (around 11-15 per cent).”
Depending upon the companies, they could easily witness around 60-70 per cent rise in the salaries of the H-1B visa dependent workforce, and hence have significant impact on the net profit of the companies.
However, currently the bill is yet to be passed and most of the companies are looking at mitigating the risk through increasing the local recruitment, more off-shoring, moving offices to low cost states.
“Thus the real impact will be difficult to pin down and would be depend upon the time when it actually gets implemented; which according to us could take time. Overall, we remain positive on the IT sector, and currently maintain our picks in the space-HCL Tech and Infosys,” she added.
The Lofgren Bill is yet to go through approvals with the US Congress and Senate before it comes into force.
R Chandrashekhar, President, NASSCOM said, “Our strong suggestion is that they should carefully calibrate the conditions keeping in mind the skill shortage in the US. Once that is done, they should not leave any loopholes in the rules being framed that leave some channels open for circumventing the limits.”
Pointing out issues with the fine print of the Bill, he added, raising wage levels for dependent companies alone will defeat the basic objective as non-dependent companies can continue to bring in skilled workers at lower wage levels, thereby nullifying the objective of protecting job opportunities for American nationals. “So apply the rules for everyone,” said Chandrashekhar to DNA Money.
According to him, the Bill contains provisions that may prove challenging for the Indian IT sector and will also leave loopholes that will nullify the objective of saving American jobs.
Among the provisions that needs to be considered as per Nasscom are, that the higher wage level would have ripple effects for many other industries including nursing, engineering, life sciences, and others. Secondly, the bill does not treat all IT service companies with H-1B visa holders equally, and the provisions are biased against H-1B dependent companies.