Impact of Trump's H-1B Visa Fee Hike on TCS and the Indian IT Industry

TCS ranks as the second-largest user of H-1B visas in the industry.

Tata Consultancy Services Ltd. will become the first Indian IT company to address investor concerns following Donald Trump's recent restrictions on work visas, which have caused the company's shares to drop significantly and clouded its earnings prospects.

IT services companies are currently evaluating the consequences of Trump's decision to increase H-1B visa fees to $100,000. As the second-highest user of this visa category, TCS regularly deploys thousands of engineers to client locations across the United States. Despite efforts by TCS and industry competitors to reduce their reliance on these visas in recent years, the additional expenses are expected to negatively impact profitability.

According to analysts at Jefferies, this policy change could decrease earnings across the sector by 4% to 13%, as the increased fees will completely eliminate operating profits per visa-holding employee. Furthermore, moving away from H-1B dependent staffing models will likely create talent shortages and increase wage pressures. However, Crisil Intelligence analysts predict that companies will transfer these new visa costs to clients, thereby limiting the impact on profit margins to only 10-20 basis points.

The resulting uncertainty has driven the NSE Nifty IT index down by 7.3% since Trump's announcement on September 19. This challenge comes at a time when the sector was already confronting reduced technology budgets at major U.S. corporations, decreasing discretionary spending, and losing market share to global capability centers.

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