H1-B salary rise clause will hit Indian IT cos hard: Nomura

The US Senate passed the Immigration Bill by a majority vote of 68-32 on Thursday. Speaking to CNBC-TV18 on its repercussions on Indian IT companies, Ashwin Mehta of Nomura said that the clause regarding paying more salaries to H1-B visa holders may have a significant damage.

The broking firm had downgraded IT stocks recently on concerns about impact of this bill. He expects a final call on the bill by August. Also read: US Senate passes sweeping immigration legislation Below is the edited transcript of his interview to CNBC-TV18. Q: What have you made of senate approval? How do you think the Immigration Bill issue could be for the IT companies? Does it look like a given, that the house may go through with it? A: As of now, the Senate passed it with 68-32 majority. Now, the House speaker would decide whether he lets this bill in for discussion or they work on their own draft. Till now their view is that they will work on their own draft. And the next steps will be decided around July 10. It would be in terms of the future steps to be taken. But this particular bill has all the damaging clauses for Indian IT. Q: But as the Senate passed it with a fairly overwhelming majority; will it have some kind of a pressure on the House or the speaker to not water it down too significantly? A: Anything closer to 70 has been our view. If anything closer 70 comes through, there will be some bargaining power that the Senate has in terms of considering most of the aspects of this particular Bill. However, in the House what works is the majority of majority rule. So, republicans are a majority there with 233 odd seats. Unless that majority agrees the House speaker is not likely to introduce the same Bill. There could be similarities in terms of payroll that comes in the House. Possibly, it will be more stringent on the border security aspect. Q: In terms of timelines are we looking at end of August when the House votes and takes a final call? A: Yes. July 10 and post that is when they decide whether they take up this Bill or their own version. Somewhere in August will see the voting happen. After that it will go through a Compromise Committee. It will then go again for a vote on unified Bill. Q: Is the probability of, not a disastrous outcome, but not a very good outcome for Indian IT companies, gone up in the last few days? A: Our reason for downgrading some of the stocks over the last month has been on the risks associated with this bill. The bill introduced by Senator Darrell Issa which talks about H1B and L1 salary increases; even if that were to pass, the damages could be significant. Outplacement debarment is not there in that version of the bill. It is the most severe clause for Indian IT companies. So there is a possibility of some watering down in the house. But, the H1B salary increases will be pretty damaging itself.