Major brokerage firms are largely in consensus that the recent increase in H1-B visa fees by the United States will not significantly derail the Indian information technology sector. While acknowledging a potential near term financial impact, analysts believe the industry’s evolved business models and various mitigation strategies place it in a strong position to absorb the additional costs.
The core of the argument rests on the scope of the fee hike. CLSA notes that the increase applies only to new H-1B applications, not to renewals or the existing stock of visa holders. This distinction is crucial, as it contains the extent of the financial burden. The firm estimates a worst case hit of up to six per cent to the fiscal year 2027 earnings of some companies, with firms like LTIMindtree and Persistent Systems facing the highest potential impact. In contrast, industry giants such as Tata Consultancy Services are expected to see the lowest impact, a sentiment echoed by other analysts who believe large cap IT firms are better positioned due to their substantial local employee base and established hiring channels in the US.
Indian IT companies are not without recourse. Brokerages like Emkay Global and Motilal Oswal highlight a suite of available levers to counteract the fee increase. These strategies include accelerating local hiring in the US, greater utilization of alternative visas like the L-1 for intracompany transfers, renegotiating contracts with clients to share the cost, and shifting more work to offshore delivery centers. In fact, Nuvama Institutional Equities suggests the high cost may lead companies to forgo new H-1B filings altogether, making the visa economically unviable for certain roles. This pivot would further entrench the trend of offshoring and nearshoring.
This is not a sudden challenge for the sector. Analysts point out that for the better part of a decade, Indian IT vendors have been proactively reducing their reliance on H-1B visas. The industry’s delivery models have already evolved to incorporate significant localization and subcontracting, making them more resilient to such policy changes. Nomura predicts this development will further accelerate the growth of Global Capability Centres, or GCCs, in India as clients and IT providers alike push for more offshoring and automation to offset rising onsite costs.
From an investor’s standpoint, the outlook remains cautiously optimistic. While Emkay Global warns of potential near term pressure on stock prices, stemming from broader fears of rising protectionism, the overall earnings risk is not seen as immediate. The primary impact, if any, is expected to materialize in fiscal year 2027 profitability.
CLSA has reiterated its Outperform rating on large cap firms like TCS, Infosys, HCLTech, and Wipro, where the earnings hit is projected to be a manageable one to three per cent in a worst case scenario.
Looking ahead, some see opportunity in the uncertainty. Nomura suggests that any sharp correction in stock prices should be viewed as a chance to accumulate, anticipating that the sector’s fundamental strengths and adaptability will prevail.
