The introduction of an H1-B visa Bill by the Trump administration, which spooked IT stocks, is expected to impact the profitability of software exporters in the near term, with hiring expected to slow considerably.

The Bill, introduced in the US House of Representatives on Tuesday, will make it difficult for companies in the US to employ skilled foreign workers. The Bill’s crux is that it doubles the minimum wage requirement of H1-B visa holders to $130,000/annum.

Currently, an average on-site worker earns $60,000, according to industry watchers. If the Bill becomes law, then the $150-billion Indian IT industry will face massive cost pressures.

It is important to note that this Bill has only been introduced and will need to go through several legislative discussions in the US Congress and the Senate before it becomes law.

While software exporters do not give data on the number of employees holding H1-B visas, a ComputerWorld magazine report said that nearly 86 per cent of H1-B visas for computer-related jobs and 46.5 per cent for engineering jobs were given to Indians. Last year, 2,50,000 petitions for H1-B visas were received by the US government.

Industry body Nasscom said this move will leave loopholes that will nullify the objective of saving American jobs. “There is a shortage of STEM (Science, Technology, Engineering and Math) graduates and the Bill is biased against H-1B-dependent companies,” said R Chandrashekhar, President, Nasscom.

In a joint note, Sanchit Vir Gogia and Anshoo Nandwani of Greyhound Research said the Bill does not mention any skills-based criteria. “...we believe that in light of the STEM skills gap, a thorough study of multiple factors, with skills being the primary factor, should have been the foundation of the Act.”

Industry watchers believe that India will no longer be the choice of offshore hiring. More local hiring will happen for talent, both experienced and freshers, said Alka Dhingra, Assistant General Manager, TeamLease Services. Kris Lakshmikanth, CEO, Headhunters India, said companies may resort to hiring more temps in the US.

IT stocks pummelled

IT stocks were badly hit on Tuesday as the NSE Nifty IT index slumped 3.17 per cent to 9,848.50 points. TCS fell 4.05 per cent, Infosys: 2.3 per cent, Wipro: 2.4 per cent, HCL Tech: 4.1 per cent and Tech Mahindra by 3.58 per cent. IT companies lost ₹33,000 crore in market capital.

Sarabjit Kour Nangra, Vice-President Research-IT, Angel Broking, said that a 60-70 per cent rise in the salaries of the H-1B visa dependent workforce would significantly impact profitability. A Nirmal Bang analyst added that margins, which are already under severe pressure, will be impacted negatively.

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