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Legislation to cut H1B visas: Here’s an IT industry view

US Senators introduced legislation to cut H1B visas by 15,000 and that such a visa be given to highest wage earner first. The legislation in this regard was introduced by Senators Bill Nelson of the Democratic Party and Jeff Sessions of the Republican Party.

Currently every year a maximum of 85,000 H-1B visas can be issued including 20,000 for those who completed higher education in science, technology, engineering and math (STEM). The popular work visa has been given to a large number of IT professionals from India over the years.

The H1B visa is a non-immigrant visa that allows US companies to employ foreign workers in specialty occupations that require theoretical or technical expertise in specialized fields.

However, industry stalwarts and analysts are yet worried because it is still legislation and there is low probability of it turning into a law and even if it were to turn into a law, industry body Nasccom would lobby against that. “Nasscom has consistently been putting their point of view to the US government, and Indian government too has been taking up these issues with the US government because it is an important dimension as far as IT industry is concerned and will have significant impact on the industry,” says R Chandrashekhar of Nasscom.

According to Ravi Menon, IT analyst, Elara Capital it would not be a problem in the near-term, may not even till October when the visas are issued but going forward could be a problem if it is approved.

This cut of 15,000 visas could have a substantial impact on all Tier I industry players but one should not worry about de-rating of the sector as such because rupee depreciation would come to their aid, says Menon.

Vineet Nayyar, Vice Chairman, Tech Mahindra thinks worries on this issue are a bit overstated. He does not expect this to become a law at least in Obama’s administration and post that it depends on who comes into the Senate at that time – whether republican or democrat.

Moreover, according to him most IT companies have reconciled to the fact that they have to employ more locals although it could impact the margins. That is the way companies will have to move forward because most multinationals be it in India or elsewhere have local staff.

In fact he says the IT companies are facing much bigger challenges in changing their paradigm to automation, to digitization which hare more of a worry than H1-B visas.

Reiterating, Nayar’s views Ganesh Natarajan of Zensar Technologies says it is unlikely that the will pass through during Obama administration.

He too thinks companies will have to be prepared for an environment where they do a lot of automation, employee locally as much as possible and ensure a balance work force. Therefore, it is unlikely to substantially change the costs for companies because cost of good employee in US is not substantially higher than cost of sending some on H1-B visa.

“So balancing recruitment, making sure that we see ourselves as global companies,” says Natarajan, adding that one must see this as a trend irrespective whether the bill gets passed or not.

R Chandrashekhar of Nasscom says we are seeing a general trend of various kinds of restrictive measures being proposed at different times and this is a largely trend that we will have to deal with.

However, one should also note that the need for hiring such high skilled workers to go on visas arises because of shortage of them in the US.

Reduction of certain number of visas by itself is not a big issue the main question is what is the final configuration and how the companies deal with the rising trend of protectionist measures are coming up.

For the entire discussion, watch video

Tech Mahindra stock price

On December 09, 2015, Tech Mahindra closed at Rs 527.25, down Rs 4.25, or 0.8 percent. The 52-week high of the share was Rs 749.50 and the 52-week low was Rs 458.70.

The company’s trailing 12-month (TTM) EPS was at Rs 30.14 per share as per the quarter ended September 2015. The stock’s price-to-earnings (P/E) ratio was 17.49. The latest book value of the company is Rs 116.46 per share. At current value, the price-to-book value of the company is 4.53.

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