Tech Mahindra tanks 10% as visa wage hike ups earnings risk

Analysts feel that as compared to IT peers, Tech Mahindra stands at a higher risk of losing revenue if higher minimum wage for H1-B is fixed. Shares of Tech Mahindra   slumped 10 percent as minimum salary of H-1B visa holders is proposed to be more than double.  A legislation has been introduced in the US House of Representatives which among other things calls for more than doubling the minimum salary of H-1B visa holders to USD 130,000, making it difficult for firms to use the programme to replace American employees with foreign workers, including from India.

Analysts feel that as compared to IT peers, Tech Mahindra stands at a higher risk of losing revenue if higher minimum wage for H1-B is fixed. According to Bank of America Merrill Lynch every 10 percent hike in H-1B wages can hurt earnings is an earnings risk of 4-11 percent. Tech Mahindra has earnings negative impact of 11 percent due to 10 percent hike in wage bill. Tech Mahindra’s dependence on visas is high for core IT services. The acquisition of LCC (has improved the local mix. It has 9,000 people including LCC headcount in US of which about 5000 are on visas (45 percent locals). Tech Mahindra was quoting at Rs 442.70, down Rs 29.00, or 6.15 percent on the BSE.

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