How Could H1B Visa Fee Hikes Reshape Indian IT Companies’ Growth Models?
The Indian IT services sector is one of the country’s largest export contributors, employing millions and serving global clients across industries. Leading companies like Infosys, Coforge, TCS, Wipro, HCLTech, and Firstsource depend heavily on the U.S. market, which contributes more than half of sector revenues. A significant portion of onshore delivery in the U.S. has traditionally been supported by H1B visa holders. Nomura, in its latest analysis, assesses how potential visa fee changes could affect profitability and strategic models, while also identifying its top stock picks in the sector.
Visa Dependence and Workforce Dynamics
Nomura highlights that around 20–40% of the U.S. workforce at Indian IT companies remains visa-dependent. New visa applications constituted ~17% of total filings in FY25. This reliance, while lower than a decade ago, continues to pose structural risks as policy and fee changes directly impact operating costs.
Estimated Financial Impact of Fee Hike
Assuming the FY25 pace continues and each new filing carries a one-time USD 100,000 fee, the EBIT margin impact could range from 11–99 basis points. EPS could decline by ~0.5–6% if companies do not alter their operating model. This illustrates the sensitivity of profitability to incremental cost shocks in a labor-intensive industry.
Anticipated Decline in H1B Usage
Nomura expects the number of H1B visas used by Indian IT firms to decline materially from FY27 onwards. Companies are likely to accelerate their shift toward local hiring, nearshoring, and higher offshoring to maintain competitiveness. Such changes, while increasing upfront costs, will reduce long-term dependence on visa-driven talent mobility.
Operating Model Adjustments
Indian IT companies are expected to adapt by ramping up offshore delivery centers, leveraging automation, and expanding U.S. local hiring. These adjustments will help preserve margins and limit disruptions, even as visa-related costs rise. Over the medium-to-long term, structural shifts in talent models are seen as inevitable.
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Nomura’s Top Stock Picks
Nomura maintains its Buy rating on Infosys (TP ₹1,880), citing its diversified client base, strong digital offerings, and execution track record. Coforge (TP ₹2,100) remains another top pick, supported by its domain strength in BFSI and travel verticals. Firstsource (TP ₹410) is also recommended due to its healthcare and customer management expertise, where offshore leverage is higher and visa reliance is lower.
Risks and Challenges
Key risks include higher-than-expected policy tightening, slower-than-planned operating model transitions, and client hesitancy due to cost inflation. Additionally, a sharper-than-anticipated rise in U.S. local hiring costs could weigh on margins if not offset by productivity gains.
Investor Takeaway
Nomura’s analysis underlines that while visa fee hikes pose near-term earnings risks, Indian IT companies are well-placed to adapt through structural changes in delivery models. Infosys, Coforge, and Firstsource remain its preferred picks, given their relative resilience and strategic positioning. đź“Ś Continue tracking deep-dive IT sector insights at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
tags: Nomura, Indian IT Sector, Infosys, Coforge, Firstsource, H1B Visa, IT Services, Indian Stock Market, EPS Impact
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