IT stocks
Global brokerage firm Jeffers has made a big estimate about Indian IT companies. According to a FE report, Jefferies has included Tata Consultancy Services (TCS) and Infosys in its favorite companies in the largecap sector. Jefferies believes that both these companies are in a better position to face the challenges coming from the new H-1B visa rules of America.
H-1B visa rules
The Trump government of America has imposed a new fee of $ 100,000 on new H-1B visa applications from 21 September. The brokerage firm said that IT companies have about 4-5 years to understand and adjust the impact of this change. Jefferies says that Infosys and some other companies have more number of employees working on H-1B visa, so they will see more effects of this change.
Jeffer’s opinion regarding TCS and Infosys
Jeffers Tcs Has given a hold rating and its 12 -month target price is said to be Rs 3,230, which is about 2% above the current level. At the same time, the price of Infosys shares is expected to reach Rs 1,750 next year, which shows an increase of about 13%. Brokerage has also set a target of Rs 1680 for HCL technologies and advised to buy it.
Earnings will affect
Large part of Indian IT companies earnings H-1B visa But comes due to the employees working. Companies earn about $ 150-200 thousand per annum from every onsite employee, out of which 10% i.e. $ 15-20 thousand is profit. The new $ 100,000 fee is like incorporating five to six years profit of employees’ income. Therefore, companies can reduce the use of H-1B visas in future.
With the reduced number of H-1B employees, IT companies can now turn to local employees or sub-contracting. Apart from this, she can also hiring from countries like Mexico, Canada and India. However, the cost may be higher for local hiring, which will affect profits.
Future challenges of IT sector
Jefferies believes that due to this change, IT companies will have to change the operational model. Salary hike and challenges related to AI technology can also slow down the pace of development. Due to this, the profits of IT companies may fall from 4% to 13%.