H1-B visa cut, outsourcing backlash to cast a shadow

TCS PUBLIC OFFER

Tata Consultancy Services (TCS), in its red herring prospectus filed on Thursday with Sebi for its initial public offer (IPO), said that a 200 per cent cut in the number of H1-B visas for Indian nationals visiting the US and a backlash against outsourcing are likely to have an "adverse impact" on the future prospects of the company.

The company also pointed out that political opposition to outsourcing in the US and other countries where it has a presence could "adversely affect" its business. Over 60 per cent of TCS' revenues are from its businesses in US, through onshoring and offshoring.

Any changes in the existing US laws or the enactment of new legislation restricting offshore outsourcing, particularly by private companies, may also "adversely impact our business and profitability", it said.

It was possible that the proposed legislation in the US would impose stringent laws on the granting of H1-B and L-1 visas, which would have an adverse impact on business and profitability, the document said.

Most of the TCS employees are Indian nationals providing services in US, Europe and other countries and they depend on the company's ability to obtain necessary visas and work permits.

TCS points out that its software professionals work in the US on H1-B or L-1 visas, and the reduction in H1-B visas on October 1 last year to 65,000 from 1.95 lakh would limit the company's ability to conduct operations in the US.

Apart from hiking visa processing fees, the US government has also increased the level of scrutiny in granting visas. These restrictions would make it difficult to obtain "as many H-1B visas as in the past", the prospectus adds.

Offshoring has come under "increased scrutiny" within the US due to its "perceived association with loss of jobs" and this also resulted in several state governments in that country planning to implement restrictions on outsourcing, the prospectus said.

In November 2003, the state of Indiana had cancelled a contract with TCS, under which the company was to provide certain services to the department of workforce development.

At present, TCS does not provide any "significant" back-office services to the US federal or state government entities, and do not have any significant contracts with such entities.