TCS, HCLTech Poised To Benefit From H1-B Visa Policy Changes: Macquarie

Brokerage firm Macquarie believes that ongoing changes and uncertainties in the US H1-B visa policies could present significant opportunities for Indian IT services firms, despite their small share in overall visa sponsorships. The brokerage highlights that proposals for a flat wage floor are impractical due to regional cost-of-living differences across the US. It positions Tata Consultancy Services Ltd. and HCL Technologies Ltd. as key beneficiaries.

The brokerage has given an 'outperform' rating to both stocks, with target prices of Rs 5,710 for TCS and Rs 2,020 for HCLTech. The former accounts for 1% of the total fiscal 2024 H1-B visa sponsorships, while the latter accounts for 0.9%. 

Macquarie on H1-B Visas

Macquarie's analysis of fiscal 2024 H1-B visa issuance reveals that the visas are distributed across a wide base of over 61,000 firms. The most that any single firm accounted for was just 2.7% of the overall. 

The brokerage highlighted that Indian IT firms depend heavily on H1-B visas, as hiring local technical talent in the US remains challenging. Unemployment in the Professional and Technical Services segment was just 2.9% in Nov. 2024, indicating a tight labour market.

Macquarie also flagged concerns about proposals for a flat wage floor, calling them impractical due to regional cost-of-living differences across the US. Instead, it suggested converting the H1-B visa into a temporary non-employer-specific work permit, similar to Norway's skilled work permit system, to encourage market competition and flexibility.

Amid increased scrutiny and policy changes under the Donald Trump administration, the Indian government is actively monitoring the situation of Indian H1-B visa holders in the US, according to media reports. Ministries of external affairs, commerce, and IT are collaborating to ensure that legal Indian workers are not adversely affected.

While Indian professionals may face challenges in securing H1-B visas, experts suggest that this could drive more opportunities back to India, similar to the offshoring boom seen in the 1990s and 2000s. However, this time, India is better positioned with improved infrastructure, a larger skilled workforce, and advanced communication networks.