India’s second biggest outsourcer Infosys has warned that increased rejection of work visa applications in key markets could drive its cost higher or delay projects. Top Indian IT services companies like TCS, Infosys and Wipro deploy a large number of its employees at client locations for project completions. Any change in work visa or immigration laws makes them vulnerable to staff their overseas projects with professionals who are not citizens of the country. Analysts say that tightening of norms for H-1B work visas, which are popular among Indian IT professionals, is likely to put cost pressures on the Indian IT services firms and impact their margins.

In a regulatory filing Infosys said: “Recently, there has been an increase in the number of visa application rejections. This has affected and may continue to affect our ability to obtain timely visas and staff projects. As a result, we may encounter delays or additional costs in managing such projects. Additionally, we may have to apply in advance for visas or could incur additional cost in maintaining such visas and this could result in additional expenses."

“The ability of our technology professionals to engage in work-related activity in the US, Europe and in other countries depends on the ability to obtain the necessary visas and work permits," Infosys added.

Citing the recent change in the US, Infosys said: “In the United States, the current administration has clarified existing regulations to increase scrutiny of H-1B visa renewal applications, and new H-1B visa applications for workers placed on third party worksites and junior IT workers."

These changes, Infosys added, “could negatively affect our ability to utilize current employees to fulfill existing or new projects and could also result in higher operating expenses."

Infosys in the regulatory filing also said that “similar legislative proposals have already been implemented in Australia, where the Australian government’s agenda of significant reform to the temporary and permanent work visa programs is now complete as of March 18, 2018 with the abolition of the subclass 457 visa and in Singapore."

The Bengaluru-based outsourcer also said that many countries in the European Union are continuing to “implement new regulations to move into compliance with the EU Directive of 2014 to harmonize immigration rules for intra-company transferees in most EU Member States and facilitate the transfer of managers, specialists and graduate trainees both into and within the region"

The changes, Infosys added, have significant impacts on mobility programs and have led to new notification and documentation retention requirements for companies sending service providers to EU countries.

In the regulatory filing, Infosys said that profitability could also be affected by pricing pressures on its services, volatility of the exchange rates, increased wage pressures and higher taxes.

Infosys had posted a profit of 3,612 crore in the three months to June, missing estimates due to a one-off charge of $39 million related to the fair value reduction of its Panaya unit. However, Infosys retained its revenue outlook for the fiscal year to March, with its chief executive upbeat about demand for the company’s services in the key markets of United States and Europe.