Tech Mahindra says rise in visa costs may affect margins

The rise in visa costs may affect margins of Tech Mahindra Ltd, chief financial officer Sanjoy Anand said on Friday.

“Compared to the past, visa costs have become an increasing challenge and it certainly increases our cost, which obviously impacts margins,” Anand said. Brokerage CLSA recently re-rated the IT sector, and downgraded all stocks to ‘underperform’. One of the reasons that the brokerage gave was cost escalation due to change in visa regulations in developed markets.

Switzerland, the fifth largest export market for Indian IT companies, has introduced minimum wage requirements in addition to quotas, while the UK has increased minimum wages for visas for a period greater than 12 months. US visa norms have also changed, leading to higher costs for Indian vendors.
With such regulations, Indian technology companies may be forced to hire more locals at onsite locations leading to cost increases, CLSA said.

Tech Mahindra has also seen some impact of rejection rates due to visa regulations. Another reason for the rise in costs for the company would be the wage hikes that it is likely to announce in a month’s time. Anand said the company is yet to decide on the quantum of wage hikes.

He said that compared with the past 18 months, the demand scenario for information technology services looked better. The US market is seen improving faster than Europe, but the company is optimistic about Europe, Anand said.

He mentioned it was part of the company’s strategy to explore inorganic opportunities. “I have nothing specific to say about it (acquisition) but we are always open to opportunities,” Anand said. Tech Mahindra is also looking to expand its business in Africa.

NewsWire18