H1B Visa + Salary Hikes to dent Infosys Margins

Indiainfoline in a research note has said additional costs due to H-1B Visa applications and salary hikes will take ~200bps off Infosys’s EBITDA margin in 1QFY09, resulting in a 4% QoQ decline in PAT. Infosys is to release its FY09 guidance on 15 April. Expect FY09 guidance would be revenue growth of 20% and PAT growth of 15% as against consensus estimate of 19%, which means an EPS upgrade cycle is unlikely. Given management’s none-too-encouraging comments in the recent past and clients’ weak business outlook, Infosys could even guide conservatively for a 10% PAT growth. This is really shocking and if that is the case then expect a MASSIVE SELL off in IT stocks.

Now are you shocked that how come H-1B Visa’s can take a toll on its margins ? In 2007, Infosys Technologies processed 1,734 Visa applications excluding BPO, Consluting etc The Visa processing charges + Attorney Fees + Employee Relocation cost will all add up.