US President Donald Trump has announced a significant increase in the one-time cost of H-1B visas to $100,000, initially raising concerns about its impact on Indian IT stocks. However, recent analysis suggests that the effect may be less severe than anticipated.

Reduced Dependence on H-1B Visas

Indian IT vendors have significantly reduced their reliance on H-1B visas over the past decade through localization efforts in the US and increased local hiring. Currently:

• Only about 20% of employees work on-site
• 20-30% of on-site workers hold H-1B visas
• H-1B visa holders represent just 3-5% of the total active workforce for typical Indian IT vendors

Key Points of the Visa Fee Hike

• The new fee of $100,000 applies only to new H-1B petitions
• Existing H-1B visa holders and renewals are not affected by this increase

Impact on Indian IT Companies

Due to the reduced reliance on H-1B visas, Motilal Oswal suggests that potential fee increases would likely have a muted impact on earnings per share. However, analysts anticipate that this move may put some pressure on IT companies to consider:

1. Shifting more jobs to India
2. Increasing charges to their clients

Differential Impact on IT Firms

• Larger firms like Tata Consultancy Services (TCS), Infosys, and Wipro are expected to manage the near-term costs better
• Mid-tier companies with higher dependence on fresh H-1B approvals may face more significant challenges

Current Market Performance

The Indian IT sector has been facing headwinds, as evidenced by the year-to-date performance of major IT stocks:

Market Sentiment and Analyst Opinions

While the IT sector had recently shown signs of recovery, the investment community remains divided on the best strategy moving forward:

• Some analysts advise gradual portfolio rebalancing
• Others recommend caution, citing expensive valuations relative to growth rates

Expert Insights on H-1B Visa Impact

Helios Capital founder Samir Arora provides additional perspective on the H-1B visa executive order:

• Estimates a limited impact of 5% or less on Indian IT companies
• Advises companies to clearly communicate their response strategies
• Suggests announcing plans for increased hiring of US citizens and green card holders
• Criticizes Indian companies for claiming no impact, arguing this approach could provoke stronger future restrictions

Arora emphasizes the importance of addressing the issue openly, even if the impact is limited. He suggests that by downplaying the effects, Indian IT companies may inadvertently signal that they don't require government or public support.

As the Indian IT sector adapts to this new challenge, investors and industry watchers will be closely monitoring how companies navigate the changing regulatory landscape. The market's reaction in the coming days will be crucial in determining the short-term trajectory of Indian IT stocks.

The United States has introduced a significant change to its H-1B visa program, implementing a $100,000 fee per application along with higher prevailing wage requirements. This move is set to have far-reaching implications for the global tech industry, particularly impacting Indian IT companies and their workforce.

Key Points of the New H-1B Visa Policy

• A $100,000 fee per H-1B visa application has been introduced.
• The fee applies to new visa petitions, with uncertainty surrounding renewals.
• Current H-1B holders outside the US during the rule change cannot re-enter unless their employer files a petition with the $100,000 payment.
• Higher prevailing wage requirements have been implemented.

Impact on Indian IT Sector

The new policy is expected to significantly affect the Indian IT sector, given that Indians represent 71% of H-1B approvals. In the most recent data:

Top Indian IT companies received a total of 16,244 approvals:

Financial Implications

The cost burden for top Indian IT companies could reach approximately $1.62 billion, representing 8% of their combined EBITDA of $18.60 billion. This substantial financial impact may force these companies to reassess their staffing strategies and operational models.

Comparison with Major US Tech Companies

While Indian IT firms are heavily impacted, major US tech companies also rely significantly on H-1B visas:

These three companies alone received a combined total of 15,868 H-1B approvals.

Adapting to Changes

Indian IT firms have already been reducing their reliance on H-1B visas:

• H-1B visa usage dropped from 46,000 to 24,766.
• Companies are focusing on local hiring, automation, and nearshoring strategies.

Potential Consequences

1. Smaller IT companies may be priced out of the H-1B program due to the high fees.
2. There could be an increase in offshoring strategies as companies seek to manage costs.
3. The changes may accelerate the trend of Indian IT firms hiring more local talent in the US.

This new policy represents a significant shift in the US visa landscape, potentially reshaping the global IT workforce distribution and compelling companies to innovate in their talent acquisition and deployment strategies.