IT firm margins will shrink on US local-hire pressure: Report

Even as a strong dollar helps Indian IT services companies, their margins will continue to be under pressure as they are forced to hire locally in the US due to increased visa restrictions under the Trump administration.

Despite the currency benefit as well as use of operating levers, profitability has remained flat in FY2019 at 22.5 percent on account of higher onsite hiring and sub-contracting cost necessitated by visa curbs, pricing pressure, increased regulatory costs and wage inflation, according to a new study from ICRA.

USCIS issued 10 percent less H-1B visas (fresh and renewals) during FY2018 (October-September) at 3,35,000 compared to preceding year’s 3,73,400. The recent amendment (implemented from April 1, 2019) by USCIS (United States Citizenship and Immigration Services) reversing the process for H1-B selection favouring advanced degree holders will have an adverse financial impact on the companies.