Tata Consultancy Services Ltd. will be the first Indian IT firm to face investors after Donald Trump moved to curb a key work visa, sending the company's shares tumbling and dimming its earnings outlook.
IT services firms are assessing the impact of Trump raising the fee for the H-1B visa to $100,000. TCS is the second-heaviest user of the visa type as it deploys thousands of engineers across client offices in America. While TCS and peers have been reducing their dependence on the visa in recent years, the added cost is expected to dent profits.
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The move may reduce earnings by between 4% and 13% across the sector, as the fee will entirely offset operating profits per employee on the visa, while a shift away from H-1B users will lead to a talent supply crunch and drive up wages, analysts at Jefferies said. Crisil Intelligence analysts expect the new visa costs to be passed on to clients, limiting the impact on margins to just 10-20 basis points.
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The uncertainty has pushed the NSE Nifty IT index 7.2% lower since Trump's Sept. 19 announcement. The sector was already dealing with tighter technology budgets at large US corporations, slowing discretionary spending and the ceding of market share to global capability centers.
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