IT firms face H-1B headwinds in Q4

Venkatesh Ganesh Bengaluru | Updated on January 27, 2018 Published on April 11, 2017

Software exporters likely to post revenue growth in line with market expectations

Indian software exporters are set to face stronger headwinds in the form of higher H-1B scrutiny, coupled with continued struggle in growing the digital business and continued pressure on traditional IT outsourcing business.

Analysts that BusinessLine spoke to pointed out that India’s largest exporter TCS is expected to post a 1.2 per cent revenue growth in the fourth quarter, largely in line with their expectations.

Infosys is expected to post a 1.4 per cent quarterly growth, followed by Wipro and HCL Tech, posting 2.6 per cent and 5.6 per cent, respectively. All these are in constant currency and US dollar terms.

As the companies enter the 2018 fiscal, all eyes will be on how they look at the outsourcing environment, the adoption of digital services in which Indian outsourcing companies compete with the likes of Accenture and boutique firms in the Silicon Valley.

IDBI Capital Markets & Securities expects the S&P BSE IT index to continue its under performance and said it will focus on commentary for FY18 from the IT sector from the upcoming results. The BSE IT index has underperformed the Sensex in the last three months and it added that the IT sector would continue to underperform the Sensex in the next financial year as it continues to face headwinds from muted global macroeconomic factors, risks of adverse visa rules in the US and transition of existing businesses to new technologies.

Visa impact

The recent reinforcement of H-1B laws by the US government is largely seen as a way to put brakes on the export of programmers will now force companies to get into plan B. “While they have been preparing for this eventuality, they need to move fast,” says Dinesh Goel, partner, ISG, an outsourcing advisory group. Others like Peter Schumacher, CEO of Value Leadership Group point out that from the customer perspective, these H-1B visa adjustments are almost a non-issue.

“US customers are more concerned that the leadership of Indian IT service firms is increasingly out of sync with what (US) customers are expecting,” he says.

Leadership, certainly would be one of the areas that has come under immense scrutiny in Infosys, with founder NR Narayana Murthy’s public spat with regard to the Board’s decision on aspects from compensation to corporate governance. India’s second largest software exporter is expected to guide for a 7-9 per cent growth (in constant currency) for the 2018 fiscal. Infosys’ numbers have been revised in the last three quarters and is expected to close its slowest growth year since the time Vishal Sikka took over as CEO. It posted a 9.1 per cent growth in 2015-16.

HCL Tech is expected to give a guidance in the range of 12-14 per cent, according to analysts. “Contribution from acquisitions should help HCL Tech in the coming quarters,” said Ashish Chopra, analyst, Motilal Oswal. TCS and Wipro don’t provide annual guidance.

(With inputs from Rajesh Kurup from Mumbai)

Published on April 11, 2017
This article is closed for comments.
Please Email the Editor