The US government’s decision to suspend issuance of new H1-B and L1 visas till December 2020 will have only a marginal impact of 25-30 basis points (bps) on the operating profitability of Indian information technology (IT) firms this fiscal.
However, this will be over and above a 200-250 bps decline expected because of the Covid-19 pandemic1 and will beat down operating profitability from an average ~23% seen last fiscal, a CRISIL Ratings analysis of 15 large IT firms, which account for almost 70% of the IT service sector revenue, shows.
Credit profiles of IT firms will continue to be strong supported by healthy balance sheets and liquidity.
The US move will have only a marginal impact because it pertains to just new H1-B and L1 visas issued till December 2020. Applications for renewal of visas, which on average are 3-4x new H1-B requests, remain unaffected.