Tech Mahindra warns Donald Trump’s ‘radical shift’ to hurt IT industry
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Bengaluru: Tech Mahindra Ltd vice president Vineet Nayyar on Monday warned that US President Donald Trump’s visa policy will damage the IT industry even as his company reported weak earnings and his stock fell the most in almost two years.
Tech Mahindra Ltd said net income was Rs590 crore ($91 million) in the fourth quarter, compared with the average analyst estimate of Rs780 crore, according to estimates compiled by Bloomberg. Shares fell as much as 17% and traded 12% lower at 1.18 pm local time, the largest intraday decline since May 2015, before ending the day 11.66% lower at Rs379.30.
The benchmark Sensex closed 0.26% higher at 31,109.28 points.
The US is tightening the criteria for visa programmes that Tech Mahindra and other outsourcing companies use to bring skilled foreign workers into the country. Trump and other politicians have criticized the programmes for hurting American workers and allowing companies to use cheaper employees from abroad.
“Trump’s America First agenda and focus on curbing the immigration, especially around H-1B visa policies, will hurt the IT sector,” vice chairman Vineet Nayyar said on a conference call. “The norms propose a radical shift in policies related to visa quotas and allotment, thereby, leading to a tougher application procedure and higher cost of Indian IT companies looking to bring talent to the United States.”
Several analysts cut their ratings and price targets for Tech Mahindra after it reported results, including those at JPMorgan Chase & Co. and Morgan Stanley. Vibhor Singhal of Phillip Securities Pte reduced shares to a sell rating and slashed the price target to Rs380.
Tech services companies, including Cognizant Technology Solutions, have been cutting positions in India. Some workers have blamed Trump for prompting the job losses and exacerbating problems in the industry.
Workers have begun debating whether to form the first industrywide IT union. Trade unions are common in India in manufacturing and transportation, but they never had much success in information technology because pay and benefits had historically been good.
“These are unsettling times in both in—on politics and economics of both Europe and US,” said Nayyar. “However, the demand for technological services continues unabated. We do believe that as always, given our resilience, we will be able to see through—see our way through this current fog.” Bloomberg