Suspension of the H1-B visas by the US will cost domestic IT firms Rs 1,200 crore and have a marginal 0.25-0.30 per cent impact on their profitability, a domestic rating agency said on Monday.
An increase in local hiring over the last few years since the US – the largest market for Indian IT firms - started curbing the visa issuances will help limit the impact on the Indian IT companies now, Crisil Ratings said.
It can be noted that last month, the visas used by Indian tech professionals to work out of the US were suspended by the Donald Trump administration as it looked to arrest the rising unemployment.
Crisil, however, said that the marginal impact will be over and above the up to 2.50 per cent decline in IT firms’ profits because of the Covid-19 pandemic and added that operating profitability is seen at 23 per cent in FY21 as per an analysis of 15 top firms’ performance.
The US move on the H1-B and L1 visas will have limited impact because of the lower reliance on the entry system by hiring locally, it said, adding that renewals of the visas will be unaffected.
Zooming of the denial rates to 39 per cent in FY20, up from 6 per cent in FY16, had led to lower reliance on the visas by the local IT companies, it said.
“New H1-B visa issuances contribute less than 5 per cent of the US onshore workforce of the top 5 listed Indian IT firms, which account for 60 per cent 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 per cent in fiscal 2017 to about 55-60 per cent in fiscal 2020,” its senior director Anuj Sethi said.