Trump will not be able to harm Indian IT companies, this giant American company itself predicted..

Global brokerage firm Jefferies has made a bold prediction for Indian IT companies. According to a report by FE, Jefferies has included Tata Consultancy Services (TCS) and Infosys among its favorites in the large-cap sector. Jefferies believes these two companies are well-positioned to face the challenges posed by America's new H-1B visa regulations.

H-1B Visa Rules Have a Major Impact
The Trump administration in the US has imposed a new fee of $100,000 on new H-1B visa applications, effective September 21st. The brokerage firm stated that IT companies have approximately 4-5 years to understand and adjust to the impact of this change. Jefferies states that Infosys and some other companies have a large number of employees working on H-1B visas, so they will be more affected by this change.

Jefferies' View on TCS and Infosys
Jefferies has assigned a hold rating to TCS and a 12-month target price of ₹3,230, approximately 2% upside from current levels. Infosys' share price is expected to reach ₹1,750 next year, representing an increase of approximately 13%. The brokerage has also set a target of ₹1,680 for HCL Technologies and recommends a buy rating.

Earnings Impact
Indian IT companies generate a significant portion of their revenue from H-1B visa employees. Companies earn approximately $150,000-200,000 annually from each on-site employee, of which 10%, or $15,000-20,000, is a profit. The new $100,000 fee is equivalent to covering five to six years of employee income. Therefore, companies may reduce the use of H-1B visas in the future.

With the reduction in the number of H-1B employees, IT companies may now turn to local workers or subcontracting. Additionally, they may also hire from countries like Mexico, Canada, and India. However, local hiring may come at a higher cost, impacting profitability.

Future Challenges for the IT Sector
Jefferies believes that this shift will force IT companies to adapt their operational models. Challenges related to wage increases and AI technology could also slow growth. Consequently, IT companies' profits could decline by 4% to 13%.

Disclaimer: This content has been sourced and edited from TV9. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.