Udayavni Special

H1-B visa suspension to have Rs 1,200-cr impact on Indian IT firms: Crisil


PTI, Jul 7, 2020, 12:32 PM IST

New Delhi: 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 percent impact on their profitability, a domestic rating agency said.

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 percent decline in IT firms’ profits because of the COVID-19 pandemic and added that operating profitability is seen at 23 percent 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 percent in FY20, up from 6 percent 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 percent of the US onshore workforce of the top 5 listed Indian IT firms, which account for 60 percent 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 percent in fiscal 2017 to about 55-60 percent in fiscal 2020,” its senior director Anuj Sethi said.

With IT firms aiming to increase the share of local talent, especially with digital skills, the transition impact is expected to be marginal for them, he added.

“The US has proposed a transition of the existing H1-B visa issuance to a merit-based program (criteria for capping new visas at 85,000 to be decided on quantum of salary rather than the lottery system currently) or a potential increase in minimum salary floor,” it noted.

“Assuming employee requirements through new visa approvals (6,137 units in fiscal 2019) are completely met via local hiring and considering a 25 percent premium for local hiring over the H1-B route, the additional cost burden on IT firms may not exceed Rs 1,200 crore,” it said.

“Additionally, with the higher share of employees working from home and with continued restrictions on mobility due to the pandemic, the onshore requirements of IT firms are likely to be lower,” its director Sameer Charania said.

The ratings agency said it does not expect any material impact on the credit quality of most IT firms as their financial risk profile is healthy.

Udayavani is now on Telegram. Click here to join our channel and stay updated with the latest news.

Top News

Gautam Adani loses $12 billion in four days; no longer Asia’s second richest man

PM Modi launches crash course to skill, upskill over 1 lakh ‘Covid warriors’

HC to hear on June 24 Mamata’s petition challenging Suvendu’s election from Nandigram

A mix-and-match approach to COVID-19 vaccines could provide logistical and immunological benefits

MP: 4 Guards, 6 Dogs hired to protect world’s most expensive mango that sells for Rs 2.7 lakh per Kg

India records 62,480 fresh COVID-19 cases

Twitter India MD gets legal notice over Loni incident



Related Articles More

Gautam Adani loses $12 billion in four days; no longer Asia’s second richest man

Sensex rises over 200 pts in early trade; Nifty tests 15,750

Indians’ funds in Swiss banks rise to over Rs 20,000 crore: Here’s how

Sensex drops 179 pts; Nifty ends below 15,700

COVID-19 has shone a light on how globalisation can tackle inequality

MUST WATCH

Heavy rain in Hebri

Udayavani News Bulletin 17-JUN-2021

Rain harvesting: Do you know how much water is stored for 15 minutes of rain?

Chandrakant Rao | Commercial Guava Farming in Udupi

Heavy rain continues in chikkamagaluru

Latest Additions

COVID-19: Over half crore people in Maha fully vaccinated in five months

SC refuses to cancel, postpone PG final year medical exams

Gautam Adani loses $12 billion in four days; no longer Asia’s second richest man

What is the role of animal serum in making of vaccines?

SC refuses to cancel, postpone PG final year medical exams

Thanks for visiting Udayavani

You seem to have an Ad Blocker on.
To continue reading, please turn it off or whitelist Udayavani.