H-1B Visa Rule Changes Will Have No Material Impact On Indian IT Firms In 2017, Macquarie Says

The new and limiting H-1B visa rules by the U.S. government will not have any material impact on Indian information technology (IT) companies in 2017, as their employees already have visas for the current year, global brokerage Maquarie said in a research report.

Macquarie expects the IT giants to use H-1B visas “wisely”, for senior-level jobs, the brokerage firm said in a research report. As for the coming round of visa applications, companies can resort to alternatives such as local hiring and automation, it added.

“Some companies may try to get a review/stay from courts citing lack of time being given to them to prepare their applications for fiscal 2018 applications,” said the report.

Under the new rules issued by the U.S. Citizenship and Immigration Services Agency, visa sponsors will need to submit evidence to prove that H-1B visa jobs are specialised enough to require professional degrees. It also called for not giving this visa to computer programmers as it's an entry-level job and cannot be termed as a specialty occupation.

The issuance of the new rules will affect the current cycle of H-1B visa application, which began from April 3, 2017. The S&P BSE Information Technology Index fell as much as 0.68 percent on fears that fewer H-1B visas may force IT giants such as Infosys Ltd., Wipro Ltd., and Tata Consultancy Services Ltd., to hire more American workers who draw higher salaries.

Allaying Fears

The National Association of Software and Service Companies (NASSCOM) also expects a minimal impact from the new visa rules. Indian IT companies don't apply for H-1B visas for entry-level jobs, the industry body said in a statement on Tuesday.

“The clarifying guidance should have little impact on NASSCOM members as this has been the adjudicatory practice for years and also as several of our member executives have noted recently, they are applying for visas for higher level professionals this year,” it said.

Margin Pressure?

Brokerage firm Nirmal Bang Institutional Equities, on the other hand, expects the new rules to contract the margins of Indian IT companies.

The statements of U.S. politicians indicate that the “follow through would be rigorous and would impact margins,” Girish Pai, the head of equity research at Nirmal Bang wrote in a report titled ‘H1-B Visas: Margins Will Be Hit In FY18 - It's A Certainty Now'. The companies will face higher costs as new H-1B visas will be limited to higher skilled categories with higher wages. Local hiring in the U.S. will also increase, leading to higher expenses, according to Pai.

Larger changes, such as an increase in minimum wages will take another 12 months to be enforced by the legislative process, both the brokerages said.

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