The curious divergence in tech stocks' H-1B response

Mid-cap information technology (IT) services firms Coforge Ltd, Mphasis Ltd, Persistent Systems Ltd, Firstsource Solutions Ltd, Cyient Ltd and Hexaware Technologies Ltd said they have reduced reliance on such visas over the years and continue to focus on local hiring. Their small-cap peers, Inventurus Knowledge Solutions Ltd and Sasken Technologies Ltd, also do not expect any material impact from visa restrictions.

Yet, shares of seven of these companies fell 2.8% to 7%. Hexaware led the losses as its stock plunged 7.08%. Sasken bucked the trend to end 0.79% higher

Last Friday, US President Donald Trump signed an executive order requiring companies to pay $100,000 annually for every foreign worker brought under the H-1B visa, up from about $1,000 at present. White House clarified on Sunday that this one-time fee will apply only for new visa applications, and not for existing H-1B visa holders. These permits allow highly skilled non-immigrants to work in the US on a temporary basis.

RP-Sanjiv Goenka Group-owned Firstsource Solutions, a business process management services provider, was the first among the four mid-cap peers to inform exchanges that its operations would not be affected.

“…the measures will have no impact on its workforce or business operations. Firstsource has zero-dependency on the H-1B program for its operations," according to its press release dated 21 September. “...The company’s talent strategy is founded on strong local hiring and a globally distributed execution model."

Coforge’s 21 September statement, too, said, “Over the years, the Company has consciously reduced reliance on new H-1B petitions for project staffing, which is reflected in the low number of fresh petitions filed in FY25."

India’s seventh-largest information technology (IT) services provider said it filed only 65 new H-1B visa applications last fiscal, of which 63 were approved by US Citizenship and Immigration Services (USCIS). That translates to about 0.18% of its 34,187-member workforce.

Persistent Systems, which ranks ninth by business among IT peers, also does “not expect any significant impact" from the executive order, said its statement on 21 September, adding that it continues to “monitor the developments".

Its mid-cap peer Mphasis tried to allay fears over Trump’s new visa policy on Monday, citing “low H1B filing volume as well as the relative portion of our overall U.S. employees that are on H1B visas."

So far in 2025, the eighth-largest IT services firm has filed about 130 new H-1B visas, of which 78 were approved, according to its statement. That's down from about 663 people, or about 2% of its 31,442 employees, working on H-1B visas in the US last fiscal.

“Over the years, we have been steadily reducing our reliance on visas through increased local hiring, acquisitions, and partnerships. We are fully staffed for all existing client requirements and will operate in a business-as-usual mode," said Mphasis. “We will continue to adjust and evolve and are focused on making sure that our AI-led propositions solve any challenges that may arise."

Cyient said it “does not anticipate any material impact on its financials for FY26 and immediate term", according to its 21 September statement. “For FY25, the number of Cyient employees deployed on H1B was 6."

Hexaware, whose shares had tumbled 7% on Monday amid fears of visa impact, also tried to calm investor nerves. The impact on the company is “expected to be immaterial" as it has been “reducing its dependency on H1B filings in the last few years", its exchange filing said. “As a matter of fact, the Company has not made any fresh applications under the H-1B cap in April 2025."

Coforge, Mphasis, Hexaware, Persistent Systems, Firstsource and Cyient ended FY25 with revenue of $1.47 billion, $1.68 billion, $1.43 billion, $1.41 billion, $944 million, and $870 million, respectively.

Inventurus ended FY25 with about $300 million in revenue, and Sasken reported a $65 million topline last fiscal.

“Less than 5% of the overall workforce is on H-1B visas for both large- and mid-caps (IT firms) so there will not be much of a difference on the impact that each of these companies face," said Pramod Gubbi, founder of Marcellus Investment Managers.

However, according to Ashutosh Sharma, vice-president at Forrester Research, mid-tier companies are more likely to be impacted than their larger peers.

“The mid-tier business model is usually more people-dependent and less solutions-dependent. As a result, if a mid-tier organization is placing a certain number of people or consultants in a client organization, then they are likely to get impacted more by this visa fee rise because it directly impacts their cost," said Sharma.

“However, in a solutions-based model, you can have some of those roles performed remotely without having any impact on the overall solution to the client, giving large organizations a better opportunity to mitigate this additional cost," he said.

Local hiring cushion

While the mid-caps appear undisturbed, their larger peers have been silent on the impact of new visa norms.

The top five homegrown IT outsourcers, including Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd, Wipro Ltd, and Tech Mahindra Ltd, received 11,711 H-1B visa approvals in the first six months of 2025, showed USCIS data. That compares with about 3,426 such approvals for their mid-cap peers during the period.

Shares of the top five declined between 1% and 3.3% on Monday, outperforming the mid-sized peers.

The Trump administration’s H-1B visa fee hike is aimed at further reducing the influx of foreigners into the US. However, in its statement on 20 September statement, IT industry lobby Nasscom pointed out: “[I]t is also important to note that India and India-centric companies have been steadily reducing their reliance on these visas through increased local hiring in recent years."

“Moreover, with the fee being applicable from 2026 onward, gives companies time to further step up skilling programs in US and enhance local hiring," Nasscom said in a separate statement on Monday. “The industry is spending more than a billion USD on local upskilling and hiring in the US, and the number of local hires has increased tremendously."

While acknowledging that Indian IT vendors now rely less on H-1B visas, Motilal Oswal Financial Services said Trump’s move could lead to homegrown IT firms avoiding H-1B visas or could hurt the profitability of the five largest IT firms by 0.85% in the next fiscal year.

“If an IT company were to apply for 5,000 H-1Bs in FY27, the annual fee alone would amount to USD500m (5,000 × USD100k). Given the magnitude of this fee, it is likely that Indian IT companies will avoid new H-1B filings altogether, opting instead to expand offshore delivery or increase local hiring," said Motilal Oswal analysts Abhishek Pathak, Keval Bhagat and Tushar Dhonde wrote in a 21 September note.

Girish Pai, head of equity research at Bank of Baroda Capital Markets, said in a 21 September note, “If the top 5 Indian players apply for 7500 new H1-B visas (half of that of an annualized number of ~15600 in FY25 – US fiscal, which includes both new and renewals), and the costs do not get passed on to customers, there will be an overall adverse impact of ~85bps on the collective margins in FY27, ceteris paribus."