NEW DELHI -- India's Wipro Ltd. expects the higher U.S. visa costs to have a "moderate impact" on its operating margins in the current fiscal year, even as the software exporter looks to pass the increased cost on to clients.
"We consider this as normal increase in the cost of running a business in the U.S.," Chief Financial Officer Suresh Senapaty told reporters on the sidelines of an industry event. However, he declined to quantify the impact of the fee hike on operating margins. In the last fiscal year ended March 31, the Bangalore-based company, India's third largest software exporter by sales, posted an operating margin of 23.4%.
The U.S. Senate last month passed legislation that requires all companies that have more than half their U.S.-based employees on H1-B or L-1 work visas to pay thousands of dollars in new fees for each worker. The fees will be applicable from Oct. 1 and continue until 2014.
Wipro's larger rival Infosys Technologies Ltd. had earlier said it doesn't expect the higher cost of visas to impact its operating margins in the current fiscal year that began on April 1. However, it expects the cost to impact operating margins in the next fiscal year by 30 to 40 basis points.
The new charges would increase visa fees by roughly $2,000 above the $2,320 companies already pay on each application. Earlier, brokerage CLSA Asia Pacific had said it expects the doubling of visa charges to impact the operating margins of Indian technology companies by 40 to 60 basis points.
Margins of Indian technology companies are already weighed by the rising wage costs and the volatility in the local currency. India's technology companies, which get more than half their revenue from the U.S., send thousands of employees to client locations overseas for business purposes.
Like Infosys, Wipro also plans to pass the higher visa costs on to clients and hire more local employees to take on this challenge, Mr. Senapaty said. The company had said in February it plans to hire 1,000 employees in the U.S. over the next three years, the majority of which would be locals. At the time, the company said it had 7,000 employees in the U.S., 30% of which were locals.
The company is also in talks with clients in the U.S. seeking "price adjustments" to include the higher visa costs, Mr. Senapaty said.
He said Wipro has also finalised its partners for joint ventures it is seeking to form to enter India's defence sector. "The government of India is spending a lot on defence and therefore there are a lot of new technologies coming into play," Mr. Senapaty said.
Earlier, local media reports said Wipro had filed an application with the country's foreign investment regulator seeking permission to design, develop and manufacture defence-related items.
India, one of the world's top importers of defense equipment, has allocated 1.47 trillion rupees ($31.6 billion) as capital expenditure in the current fiscal year through March 31, up from 1.42 trillion rupees in the previous year.
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