US immigration bill: Some relief for Indian IT sector
Nomura believes the House not taking up the Senate immigration bill is a temporary reprieve for the Indian IT sector as: 1) in a larger comprehensive bill the high skilled visa related provisions could have slid through without much opposition, 2) the Skills Visa Act introduced in the House is likely to be considered
 
On Wednesday, the House Republican leaders in a closed door meeting decided not to put the Senate immigration bill (which has several damaging provisions for the Indian IT sector including ban on outplacement) to vote in the House. This stand is consistent with what the House Speaker had maintained ever since the immigration bill was approved in the Senate, said Nomura Equity Research in its Quick Note on the issue.
 
The House Republican leadership also decided that instead of a comprehensive immigration bill they are more in favour or a series of smaller bills addressing individual topics.
 
The Republicans’ disagreements with the Democrats on this bill are on: 1) border security so as to stop entry of illegal immigrants, and 2) path of citizenship to illegal immigrants, where Republicans themselves are divided, revealed Nomura. 
 
Republicans wants to first fix the problem of illegal immigration by sealing the borders, before any citizenship is granted. Democrats, on the other hand, want to enhance border security but in parallel start the process of citizenship for illegal immigrants while continuing to work on border security.
 
The individual draft bills covering various aspects of immigration are still not ready in the House, but this should become clearer over the next few weeks.
 
Nomura believes the House not taking up the Senate immigration bill is a temporary reprieve for the Indian IT sector as: 1) in a larger comprehensive bill the high skilled visa related provisions (which were damaging for Indian IT) could have slid through without much opposition, 2) the Skills Visa Act introduced in the House is likely to be considered.
 
This bill addresses the US high-skilled immigration program and is less damaging for Indian IT with only H1B and L1 salary increases and no mention of outplacement debarment (most damaging clause for Indian IT which was present in the Senate version), according to the brokerage.
 
The brokerage believes this development pushes the focus back on 1QFY14 results where the key focus would be on whether the rupee depreciation benefits margins. If so, it could offset impacts from a diluted immigration bill passing. Nomura’s view remains contrary to the Street—it does not expect material rupee depreciation benefits and believes the risks of a diluted bill are not getting priced in. Its target prices build in 50% impact of a bill without outplacement debarment passing. Nomura maintains Reduce on Infosys and TCS, and Buy on HCL Technologies, Cognizant Technology Solutions Corporation and Wipro.
 
Statement of the House Republican leadership on the Senate immigration bill:
“Today House Republicans affirmed that rather than take up the flawed legislation rushed through the Senate, House committees will continue their work on a step-by-step, common-sense approach to fixing what has long been a broken system. The American people want our border secured, our laws enforced, and the problems in our immigration system fixed to strengthen our economy. But they don't trust a Democratic-controlled Washington, and they’re alarmed by the president’s ongoing insistence on enacting a single, massive, Obamacare-like bill rather than pursuing a step-by-step, common-sense approach to actually fix the problem. The president has also demonstrated he is willing to unilaterally delay or ignore significant portions of laws he himself has signed, raising concerns among Americans that this administration cannot be trusted to deliver on its promises to secure the border and enforce laws as part of a single, massive bill like the one passed by the Senate.”
 
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