US PERM Suspension May Hike Costs for Indian IT Giants
JM Financial warns that the US suspension of PERM applications for major tech giants like TCS and Infosys could drive up costs for Indian IT firms.
The Indian IT sector is bracing for a significant shift in operational dynamics following the United States administration's decision to suspend labour certification applications for eight major technology companies. According to a recent report by JM Financial, this move could escalate operating costs and dampen investor sentiment for some of the industry's biggest players.
The suspension, announced on October 8, 2026, targets heavyweights including Microsoft, Adobe, Cognizant, Infosys, TCS, Wipro, HCL Technologies, and Capgemini. The US Department of Labor has indicated that it will stop accepting new Permanent Labor Certification (PERM) applications and cease processing pending ones for these specific firms, with no clear end date provided for the restriction.
Uncertainty for H-1B Employees
While the move does not impact the entire H-1B workforce, it creates a high-stakes environment for specific groups of employees. The primary impact is felt by those with pending PERM applications or those whose employers have not yet filed them.
“Employees approaching the usual six-year H-1B limit without qualifying green card filings could face greater uncertainty around their ability to extend their stay,” JM Financial noted in its report. This lack of clarity regarding long-term residency status could lead to talent instability within these organizations.
Rising Costs and Mitigation Strategies
The report highlights several financial and operational hurdles that Indian IT firms must now navigate. As immigration restrictions persist, companies are likely to face increased expenses related to:
- Hiring and Retention: The need to find new talent and keep existing employees amidst legal uncertainty.
- Subcontracting: Relying on third-party vendors to fill critical gaps.
- Transition Costs: Moving roles or personnel to different locations.
- Onsite Staffing: A push toward local hiring in the US may increase the cost of maintaining onsite presence.
To cushion the blow, JM Financial suggests that companies will likely lean more heavily on local hiring and offshoring. By expanding their local workforce within the US and diversifying their global delivery locations, firms can reduce their heavy dependence on visas and ensure that service delivery remains uninterrupted.
The Bottom Line for Investors
Despite these mitigation efforts, the financial outlook remains cautious. While higher offshoring and selective cost-sharing with clients may provide some relief, the overall cost of delivery is expected to rise. This trend poses a direct risk to the Earnings Per Share (EPS) of the affected companies.
“Net-net, we see a risk of higher delivery costs despite these mitigation strategies. We would, therefore, monitor EPS for the companies impacted,” the JM Financial report concluded.