H-1B Visa Impact on Indian IT Cos: Crisil Analysis

Mumbai, Sep 25 (PTI) US President Donald Trump's move to levy higher fees for granting the H-1B visas will impact Indian IT majors' profit margins by only 0.20 per cent, an arm of a domestic rating agency said on Thursday.

This is because the reliance of IT companies on H-1B visas has been reducing since 2018, when the denial rates for the visa applications increased to 24 per cent, Crisil Intelligence said.

"The US decision to impose a USD 100,000 fee on new H-1B visas for foreign workers will snip just 10-20 basis points from the operating margins of Indian information technology (IT) services companies next fiscal," it said in a note.

These companies, which had operating margins of 22 per cent in FY25, are likely to share the incremental cost with clients, the note said, adding that the pass-through is estimated at 30-70 per cent.

IT firms have expanded offshore delivery, opened near shore centres and hired locally in the US, it said, adding that this trend has continued even as the denial rate eased to 3 per cent in 2024.

Citing official US data, it said the number of Indian employees on H-1B visas working for TCS, Infosys, Wipro and HCL Technologies almost halved from 34,507 to 17,997 between 2017 and 2025.

India's IT services industry is expected to reel in USD 143-145 billion this fiscal year, marking a revenue growth of 2-4 per cent over last fiscal year, it said, adding that from next fiscal year, growth is expected to be only marginal or flat.

Between October 2023 and September 2024, total H-1B visas issued for four IT companies, which account for 50 per cent of the industry revenue, stood at 34,507, it said, adding that over 35 per cent was for initial employment and 65 per cent for continuing employment. The share of initial employment is expected to decline over the medium term, it said.

Visa expenses come at 0.02-0.05 per cent of the total employee cost, with H-1B visa fees ranging between USD 2,000 and USD 5,000 per person, it said.

Over a third of the approved H-1B applications from October 2023 to September 2024 were for initial employment and if this share remains constant next fiscal year, the new fee structure could crank up visa cost to 1 per cent of total employee cost. If the share is reduced, visa-related costs are expected to remain 0.3-0.6 per cent of the total employee cost.

Tier-1 IT companies such as TCS, Infosys, Wipro and HCL generate 96 per cent of their revenue from the international markets, with the US alone accounting for 53 per cent.

Last fiscal year, the industry exported USD 119 billion in services, reflecting its scale in global outsourcing.

India remained the top recipient of remittances at USD 118.7 billion in FY24, with about 23 per cent of it coming from the US. The visa fee hike is likely to reduce both the inflows and the share of the US over the medium term.

The visa fee hike is expected to also accelerate offshoring and deter students considering higher studies in the US.