IT firms may raise fees to counter dearer US visas
Mumbai, January 11
India’s export-driven IT outsourcing firms are likely to raise client fees and process more work from their centres in India to cushion the impact of an increase in fees for work visas in the United States, their top market, investors said.
The new US measure will shave 50-60 basis points off the profit margins of information technology firms including Tata Consultancy Services (TCS) and Infosys from the next fiscal year starting April 1, they said.
India’s roughly $150 billion outsourcing sector generates about three quarters of its revenue from the United States, where outsourcing companies send thousands of staff every year to work at client locations.
TCS, leader of the Indian IT outsourcing industry, is likely to post a 10 per cent increase in its December quarter net profit on Tuesday, while Infosys is expected to report a three per cent rise in profit on Thursday, according to Thomson Reuters data.
TCS, second-largest exporter Infosys and number three Wipro have in the past year increased their focus on high-margin digital and cloud computing services, as competition and pricing pressure on routine IT services dented growth.
The measure passed last month by the US Congress doubled the cost of sponsoring workers under short-term
H1B and L1 visas, and spurred concerns of future curbs on IT work sent overseas by US companies before US presidential election.
“The higher visa fee is one of the headwinds...but they can expect to recoup some of the costs through contract re-negotiations and the stronger dollar,” said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance.
Indian IT industry lobby group, the National Association of Software and Service Companies (Nasscom), estimates local IT firms would incur an extra $400 million a year in costs due to the spike in visa fees.
“The higher fee is unjustified because it is designed to hurt India firms disproportionately,” said R Chandrasekhar, president of Nasscom. “Immigration reform in general in the US is something that has to happen sooner or later.”