Indian IT Cos Likely to Ramp Up Offshoring, Nearshoring to Deal with Hiked H-1B Visa Fee, Say Analysts

US President Donald Trump’s latest salvo against Indian interests amid broader trade tariff related measures materialised in the form of a nearly 100x jump in one-time fees for new H-1B visa applicants to $100,000, announced on September 19. Although Indian IT services companies generate a large portion of their business from the US, due to the reducing dependence of these firms on H-1B visa workers, brokerages see only a marginal impact on their US business operations, and unlikely to be disruptive.

The top five Indian IT firms derive roughly 55% of their revenue from the US, while other mid caps have higher exposure at 75–80%, according to brokerage firm Nuvama Institutional Equities. In that backdrop, the Nifty IT index declined over 4% to touch an intra-day low of 35,145.10, on Monday. Losses in the sectoral index were led by midcap stocks, including Mphasis, LTIMindtree and Coforge, down around 4% each, while largecaps like HCLTech, Wipro, Infosys, TechM and TCS were lower between 1.86% to 3%, around 3 pm. In comparison, the Nifty 50 index was trading lower by 0.51% at 25,197 around the same time.

Meanwhile, H-1B visa dependency of Indian IT firms has reduced meaningfully over the past decade, says a research report by brokerage firm Prabhudas Lilladhar, adding that median visa approvals (new and renewals) as a percentage of headcount stood at 0.7% in 1HCY25 compared to 3.4% in CY16.

“As a result, the overall financial impact of higher visa fee remains limited for most players, given their reduced reliance on new H-1B approvals,” noted Pritesh Thakkar and Sujay Chavan of the brokerage firm.

Further, analysts Dipeshkumar Mehta, Jimit Gandhi and Shivang Bagla, of Emkay Research, are of the view that since it is a one-time fee per filing rather than an annual charge, the direct cost burden is expected to remain contained for employers.

Meanwhile, analysts Abhishek Kumar, Nandan Arekal, and Anushree Rustagi at JM Financial Research say Indian IT “Players will likely apply for new petitions only for specific skill-sets where the client is willing to pay for the visa fee.”

They add that project delivery will not be impacted as there’s no impact on existing H-1B visa holders.

What Changes in H-1B visa fees

President Donald Trump, on September 19, 2025, issued an order imposing a $100,000 one-time fee requirement for all new H-1B visa petitions for workers currently outside the US, effective 21-Sep-2025 (for at least 12 months), with the aim to protect American jobs. The Trump administration clarified that this action does not apply to existing H-1B visa holders, approved petitions, in-country renewals, or change of status.

The proclamation directs government agencies to enforce payment verification, retain documentation, and begin rule-making for raising prevailing wage levels and restructuring the H-1B program to prioritise higher-paid, higher-skilled applicants.

However, visa applications for FY26 are already locked in, and the $100,000 fee will start to impact from FY27 onwards, when new petitions are filed.

What’s the impact of new H-1B visa fees

On Offshoring & Nearshoring

Indian IT firms’ dependence on H-1B visas has been declining over the past few years driven by stricter US immigration policies and a shift toward increased local hiring, according to analysts. Brokerage firm JM Financial estimates that the top 10 Indian IT firms have 1.2-4.1% of their total employee base on H-1B visas.

Consequently, they expect the new hiked visa fees to accelerate the trend of offshoring/ nearshoring for Indian IT firms. “The H-1B fee reinforces a shift toward offshore and nearshore delivery for roles that do not require presence in the US,” notes Emkay Global.

Prabhudas Lilladhar, meanwhile, adds, “With the H-1B visa fee hike, we expect visa dependency to reduce further, and right shoring and offshoring to remain the key drivers to rationalise delivery charges.”

Citing the acceleration of the offshoring trend post COVID to its full potential, the brokerage firm states, “We expect the momentum to continue with near shoring (Canada, Mexico) likely to be an immediate available alternative before the lottery cycle falls due. We don’t see near-term impact until Mar’26; however, medium-term earnings (FY27E) might get impacted by median ~2.6% across our IT coverage universe.”

Meanwhile, Nuvama expects Indian IT firms to hire more local talent over the long-term, and restrict the use of H-1B visa workers to absolutely critical and irreplacable job profiles.

On Project Delivery & Renegotiations

According to Nuvama, IT services companies will choose not to pay the higher visa fee, as the current median H-1B salary for Indian IT firms ranges between $80,000 and $120,000, makes the hiked H-1B visa fee economically unviable.

The brokerage firm adds that companies will look to renegotiate contracts with clients with a view to share higher costs or hire more local talent in the US. It notes that the hiked visa fee may also affect the near-term pipeline, as deals currently in progress may be delayed or put on hold.

Emkay Global notes that increased scrutiny, risks of further protectionist measures, and H-1B incremental fee imposition could potentially prolong sales cycles, as clients might reassess resource plans, evaluate onshore/offshore workforce mix, and negotiate cost-sharing for roles exposed to the fee.

It further notes that engagements that depend heavily on H-1B staffing could face selective repricing, as clients may prefer delivery models that minimise fee-triggering roles and maximise offshore or local workforce.

Impact on Margins

In case new visa applications continue at the same pace, brokerage firms estimate an EBIT margin impact of 11-99 bps, and EPS by around 0.5%-6%, according to Nomura. “We assume new visa applications would continue at the same pace as in FY25 with a one-time impact of USD100k fees at the time of filing. This could hit EBIT margin for some companies in our coverage universe by 11-99bp and EPS by ~0.5-6% assuming they do not make any changes to their operating model,” it noted.

However, it added, “We believe the number of H1B visas are going to come down materially in the next cycle (FY27F)”.

Analysts at Prabhudas Lilladhar, meanwhile, note: “The USD100,000 fee on new H-1B visa approvals translates into an incremental median margin impact of ~40bps and EPS erosion of ~200bps across our coverage universe in FY27E.” Large-cap IT players will face modest headwinds, with EBIT margin declines of 30–60bps and EPS impact of 1–4%, it added.