Should you buy Indian IT stocks after the US Green Card freeze?

The US government has stopped some of the biggest IT companies, including TCS, Infosys, Wipro and HCLTech, from starting new Green Card applications for their employees. It sounds like bad news for Indian IT, but our research desk sees the weakness as a buying opportunity, so let’s get to it! 

A Green Card is the document that lets someone live and work in the US permanently. A work visa such as the H-1B is a bit like renting a home, because it comes with an end date and has to be renewed, while a Green Card is closer to owning the home, since the person can stay and work without that clock ticking. Many Indian IT professionals in the US start on a work visa and hope to move to a Green Card over time, and their employers often help them do it, which makes it an important tool for keeping senior talent in the US.

The company usually applies for a Green Card on the employee's behalf, and the very first step is a process called PERM, short for Permanent Labor Certification, in which the employer shows the US Department of Labor that it looked for a US worker, did not find a suitable one, and is paying the going wage. 
 

The Department of Labor has now suspended TCS, Infosys, Wipro, HCLTech, Cognizant and Capgemini, along with the US giants Microsoft and Adobe, from using PERM, which means these companies cannot start new Green Card applications through this route for the time being. A few things stay exactly as they were:
 

• Existing Green Cards Anyone who already holds one, or has an approved petition (called an I-140), keeps it.
• Work visas Current H-1B and L-1 visas and their extensions continue.
• Client travel Temporary business trips to client sites carry on.

Headline sentiment tends to default to worries about visa barriers, and it is easy to see why, since Indian IT has long depended on moving people to client sites in the US. However, we expect this worry to show up as early weakness in IT stocks, and that is the moment it believes deserves a closer look.

We’ve jotted down five reasons below why we think IT remains a strong buy despite what the headline suggests: 
 

• Higher margins: An engineer based in the US costs a company roughly $130,000 to $165,000 a year, while an equivalent engineer in India costs about $18,000 to $26,000, which is why work done from India earns margins of about 30% to 38% or more against 14% to 18% for work done in the US. If Green Cards become harder to get, companies are less likely to plan teams that sit in the US for the long run and more likely to design projects around delivery from India. According to the research note, every 1% of work that moves offshore adds about 0.25 to 0.40 percentage points to a large IT company's operating margin, which is the profit left after running costs as a share of revenue and one of the first things investors check.

   

• Fewer exits: Companies have often sponsored Green Cards for their senior people, only to see some of them move to US tech giants or client companies once the process was secure, and replacing a senior architect or project head can cost one and a half to two times their annual salary. Since Microsoft and Adobe are in the same suspension, one of Big Tech's strongest draws is weaker for now.

   

• Lower costs: Each application costs a company about $10,000 to $15,000 in legal and filing fees, and none of it can be billed to clients. With these applications on hold, the research desk estimates that savings could run into tens of millions of dollars across the large US workforces involved.

   

• Less dependence: Indian IT leans on US visas far less than it used to. A decade ago these firms took more than 35% of new H-1B visas, and today the share is roughly 3% to 5%, while 55% to 65% or more of the US staff at TCS, Infosys and HCLTech are local hires, existing permanent residents or locally contracted workers, so day to day delivery in the US carries on largely as usual.

   

• Revenue elsewhere: Money earned outside the US sits beyond the reach of US immigration rules, and for these companies it is a big slice, roughly 40% to 50% of the total. 

Many global companies run their own technology centres in India, known as Global Capability Centres or GCCs, and the country now has more than 1,600 of them employing over 1.9 million people. If it becomes harder to bring engineers to the US, more work could move into these centres, and Indian IT firms help set up and run many of them. Research and engineering work, such as designing chips or software for cars, is another growing pocket, with Nasscom projecting India's outsourced share at $65 billion to $70 billion between 2026 and 2028, up from $45 billion earlier in the decade.

Our research desk, in a note by Head of research, Abhishek Jain, believes the freeze could support a margin push and a shift in business model for Indian IT companies, and suggests using early weakness in these stocks as an entry opportunity. That is a contrarian call, because it means buying when the first reaction is selling, so it suits investors who are comfortable going against the crowd and who have checked prices and their own risk appetite.

What is a Green Card?
A Green Card is a US document that lets a person live and work in the country permanently, without having to renew a work visa. Many Indian IT professionals in the US start on a work visa and later move to a Green Card, often with their employer's help.
 

What is the PERM programme and why does it matter for Indian IT?
PERM, or Permanent Labor Certification, is the labour market test a US employer must clear before sponsoring a foreign worker for a Green Card. It matters for Indian IT because the large firms have used it to retain senior talent in the US, so a suspension changes how they plan long term onsite teams.
 

Does the PERM suspension affect existing H-1B visas or Green Cards?
No, according to the research note, existing H-1B and L-1 extensions, previously approved I-140 petitions and Green Cards, and temporary client travel are not revoked. The suspension applies to the named companies using the PERM route for new Green Card sponsorship.
 

Will the PERM suspension hurt TCS, Infosys, Wipro and HCLTech?
Arihant Capital's research desk sees it as more likely to support margins than to hurt them, mainly because work that shifts offshore tends to earn higher margins. Around 43% to 50% of revenue at these companies comes from outside the US, which adds a cushion, though how long the suspension lasts is worth watching.
 

How much revenue do Indian IT companies earn outside the US?
According to Arihant Capital research, about 49% to 50% of TCS revenue, 43% to 44% of Infosys and HCLTech revenue, and above 40% of Wipro revenue comes from outside the US. Europe is the largest piece, at roughly 28% to 32% for each of these four.
 

What are GCCs and why do they matter here?
Global Capability Centres, or GCCs, are in house technology and engineering hubs that global companies run in India, and the country has more than 1,600 of them. When companies cannot easily bring engineers to the US, more work tends to move into these centres, which Indian IT firms serve through managed services and build and operate transfer deals.
 

What is Arihant Capital's view on Indian IT stocks after the PERM suspension?
In a note by Abhishek Jain, Arihant Capital's research desk says the suspension could drive a margin push and a change in business model for Indian IT companies, and suggests using early weakness as an entry opportunity. 

Read the full disclaimer in the article before acting on any research view.