New H1B visa norms may affect Indian IT companies’ margins in FY20

A further squeeze is expected in this financial year on the operating margin of Indian information technology (IT) companies.

Most of the top ones saw a margin dilution in 2018-19, with spiraling employee cost, triggered by massive hiring in onshore locations. The US is their largest market in terms of revenue contribution and they have been aiming at far more local hiring there. A shortage of new technology talent is another factor. Employee expenses account for 60-65 per cent of total operating cost and a report from rating firm CRISIL says employee expense and the cost per employee for tier-I companies rose at 17 per cent and 9 per cent in FY19, respectively, compared with around 6 and 3 per cent, respectively, a year before.