LTM

By Haripriya Suresh

BENGALURU, July 14 (Reuters) - Indian software services firm LTM LTIM.NS expects AI revenue to outpace its traditional services business, CEO Venu Lambu told Reuters, betting that enterprises will need IT companies to deploy powerful large language models from firms such as Anthropic and OpenAI.

Investor worries that increasingly capable AI models could disrupt the businesses of traditional IT services firms have led to India's Nifty IT index .NIFTYIT falling more than 23% year-to-date, on course for its second-biggest loss since 2008.

LTM, which on Monday signed a partnership with Anthropic to deploy Claude to enterprise clients, is betting that these models will help create a new implementation market for IT firms "with the right context at the right costs".

"Pretty much all" deals have an AI component to them, Lambu said, but expensive frontier models are not needed for every business scenario, he added.

Instead, the acceleration of AI adoption could see projects start off small and varied, "but once you deliver a proof point to the customer, it just multiplies with the same customers," he said, adding he expects enterprise AI adoption to accelerate in the second half of fiscal year 2027.

LTM, which posted a 6.1% year-on-year rise in first-quarter revenue, disclosed its AI revenue for the first time — $150 million on a quarterly run-rate basis, or 12% of total revenue, across three AI-native businesses.

These are segments in which AI is designed as a core component from the ground up, while enterprise AI involves embedding AI into clients' technology stacks and software processes. LTM does not count sales from enterprise AI in its AI revenue bucket.

Larger peer HCLTech reported so-called advanced AI revenue of $171 million in the June quarter, about 4.6% of overall revenue.

A "big concern" for clients is the token costs involved with using AI models, Lambu said, as AI firms are increasingly shifting to token-based pricing that charges customers based on usage. The focus is on helping companies establish governance frameworks to control usage and costs, he added.

(Reporting by Haripriya Suresh in Bengaluru; Editing by Janane Venkatraman)

(([email protected]))

Updates

** Indian IT services firm LTM LTIM.NS on Saturday posted Q1 consol net profit rise of 17%; rev from ops up 18%

** Co expects growth momentum to continue through year thanks to strong order book and healthy pipeline across industry segments, said CEO Venu Lambu

** Shares up 4.5%

EARNINGS IN LINE

** Axis Capital ("buy") cautiously optimistic on sector; says total inflows of $1.7 bln, including two large deal wins, supports management's confidence in growth acceleration

** Citi ("sell") says performance in line with lowered expectations for IT sector as a whole, notes top 5 client revenue increased 4.5% q/q after four consecutive quarters of decline

** Emkay Global ("add", PT 4350 rupees) says deal wins remained healthy with AI rev (~12% of total rev) reaching quarterly run rate of $150 mln

** Emkay says q/q rev growth muted partly due to delayed ramp-up of large deal in India and war-related disruption in Middle East

** JPMorgan says co's acquisition of Randstad's tech consulting business is a sign that organic growth could be tougher to accelerate; maintains "neutral" rating (PT 4050 rupees) and cuts EPS estimates by 3-8% due to FX losses

($1 = 95.7400 Indian rupees)

(Reporting by Abhirami G in Bengaluru)

(([email protected]))

July 6 (Reuters) - LTM Ltd LTIM.NS:

• LTM LAUNCHES BLUEVERSE RIGHTLOGIC CYBERSECURITY FRAMEWORK

Source text: ID:nNSE1dxw4F

Further company coverage: LTIM.NS

(([email protected];))

June 30 (Reuters) - Ovh Groupe SA OVH.PA:

• LTM TO DELIVER SOVEREIGN CLOUD AND AI IN EUROPE THROUGH STRATEGIC PARTNERSHIP WITH OVHCLOUD

Source text: [ID:]

Further company coverage: OVH.PALTIM.NS

(Gdansk Newsroom)

(([email protected]; +48 58 769 66 00;))

June 24 (Reuters) - LTM Ltd LTIM.NS:

• LTIMINDTREE - JOINS ATHENA COALITION TO SECURE OPEN SOURCE SOFTWARE

Source text: ID:nBSE5qfGHj

Further company coverage: LTIM.NS

(([email protected];))

June 15 (Reuters) - LTM Ltd LTIM.NS:

• LAUNCHES BLUEVERSE FOR IRUN, AN AI-NATIVE MANAGED SERVICES MODEL

Source text: ID:nBSE4Nwkv

Further company coverage: LTIM.NS

(([email protected];;))

June 10 (Reuters) - LTM Ltd LTIM.NS:

• LTM - INTRODUCES BLUEVERSE CURRENCY, AN AI-LINKED OUTCOME-BASED PRICING MODEL

Source text: ID:nBSE8WRl1t

Further company coverage: LTIM.NS

(([email protected];))

** India's software services provider LTM LTIM.NS unveiled its five-year strategy on Tuesday, targeting a doubling of revenue through AI-led growth and outcome-based offerings

** Shares of LTIM down 6.67% to 4,052 rupees

MIXED VIEWS ON EXECUTION

** Jefferies ("underperform"; PT: 3,500 rupees) says shift to outcome-based pricing will require significant changes to LTM's pricing and talent strategy and may not be easy to execute

** Adds AI-led deflation, weak discretionary spending and slower growth in key verticals could keep revenue growth in check

** BOB Capital Markets ("hold"; PT: 4,367 rupees) says LTIM's goal of doubling revenue by FY31 appears ambitious, though its target for 200 basis points of margin expansion looks more achievable

** ICICI Direct Research says co well positioned to outperform larger peers through strategic partnerships, stronger deal momentum and a shift toward outcome-based offerings

** Emkay Global ("add"; PT: 4,700 rupees) says LTM will benefit from growing AI adoption and technology convergence

(Reporting by Devika Nair in Bengaluru)

(([email protected];))

June 2 (Reuters) - LTM Ltd LTIM.NS:

• LTM - AIMS TO INCREASE EBIT BY 200 BPS BY FY31

• LTM - TARGETS TO DOUBLE THEIR REVENUE BY FY2031

Source text: ID:nBSE2ltL5v

Further company coverage: LTIM.NS

(([email protected];))

May 25 (Reuters) - LTM Ltd LTIM.NS:

• LTM - TO DRIVE MODERNIZATION OF IT INFRASTRUCTURE AND APPLICATION SUPPORT FOR UK-BASED SSP GROUP

Source text: [ID:]

Further company coverage: LTIM.NS

(([email protected];))

May 22 (Reuters) - Larsen and Toubro Ltd LART.NS:

• LTM OFFERS TO ACQUIRE RANDSTAD’S TECHNOLOGY AND CONSULTING SERVICES BUSINESS IN EUROPE AND AUSTRALIA

• PROPOSED TRANSACTION VALUES OPERATIONS TO BE ACQUIRED AT AN ENTERPRISE VALUE OF EUR 160 MILLION ON A CASH AND DEBT-FREE BASIS

Source for text: Here

Further company coverage: LART.NS

(Gdansk Newsroom)

(([email protected]; +48 587 785 110;))

May 13 (Reuters) - LTM Ltd LTIM.NS:

• LTIMINDTREE - LAUNCHES BLUEVERSE M.A.X AI MARKETING SOLUTION BUILT ON SALESFORCE AGENTFORCE

Source text: ID:nNSEf3wYc

Further company coverage: LTIM.NS

(([email protected];))

May 5 (Reuters) - LTM Ltd LTIM.NS:

• LTM- LTM AND UNIPHORE PARTNER TO SCALE DOMAIN-SPECIFIC AI ACROSS CORE BUSINESS PROCESSES

Source text: ID:nBSE8zMLbH

Further company coverage: LTIM.NS

(([email protected];))

Updates

** Shares of India's LTM LTIM.NS extend losses, last down 4.8% at 4,306.3 rupees; stock biggest loser on Nifty IT index .NIFTYIT

** Software services provider posts Q4 revenue of 112.92 billion rupees ($1.20 billion) vs analyst expectations of 112 billion rupees - LSEG data

** Revenue from banking and financial services unit- its largest - fell 5.3% y/y

** Jefferies ("underperform", cuts TP to 3,700 rupees) says margins fell on wage hikes and commitments to key clients, partly offset by currency gains

** Expects margins to remain range-bound at ~15.5%, with limited scope for expansion

** Ambit Capital ("sell", TP: 3,880 rupees) flags lags weak growth and margin pressure, sees valuations stretched

** Antique Stock Broking ("buy", TP:5,625 rupees) sees strong FY27 outlook on deal wins and AI push, flags near-term uncertainty in deal ramp-ups

** YTD, stock down 22.27% vs 22.20% decline in NIFTY IT .NIFTYIT

($1 = 94.1600 Indian rupees)

(Reporting by Devika Nair in Bengaluru)

(([email protected];))

April 23 (Reuters) - LTM Ltd LTIM.NS:

• Q4 CONSOL NET PROFIT 13.92 BILLION RUPEES; IBES EST. 14.13 BILLION RUPEES

• Q4 CONSOL REVENUE FROM OPERATIONS 112.92 BILLION RUPEES; IBES EST. 112 BILLION RUPEES

• APPOINTS VIPUL CHANDRA AS WHOLE TIME DIRECTOR & CFO EFFECTIVE APRIL 23, 2026

• RECOMMENDS FINAL DIVIDEND OF 53 RUPEES PER EQUITY SHARE FOR APPROVAL AT AGM

Source text: [ID:]

Further company coverage: LTIM.NS

(([email protected];))

April 6 (Reuters) - LTM Ltd LTIM.NS:

• LTIMINDTREE - TO OFFER MIT OPEN LEARNING'S UNIVERSAL AI TO WORKFORCE WITH UPGRAD ENTERPRISE

Source text: ID:nBSE9bQ3Sq

Further company coverage: LTIM.NS

(([email protected];))

Feb 26 (Reuters) - LTIMindtree Ltd LTIM.NS:

• LTIMINDTREE - COLLABORATES WITH NVIDIA TO SUPPORT CENTRAL BOARD OF DIRECT TAXES

Source text: ID:nBSEbLfPl3

Further company coverage: LTIM.NS

(([email protected];))

Feb 23 (Reuters) - Indian IT services company LTIMindtree LTIM.NS on Monday said it has won a $100 million deal with a medical technology company in Europe.

(Reporting by Nishit Navin; Editing by Mrigank Dhaniwala)

(([email protected];))

Feb 19 (Reuters) - LTIMindtree Ltd LTIM.NS:

• LTIMINDTREE - LTM ANNOUNCES STRATEGIC COLLABORATION WITH INDIAN INSTITUTE OF CREATIVE TECHNOLOGIES

• LTIMINDTREE - 5-YEAR PARTNERSHIP TO STRENGTHEN SKILLING IN CREATIVE TECHNOLOGIES

Source text: ID:nBSE5CNKvD

Further company coverage: LTIM.NS

(([email protected];))

Updates levels, adds graphic after paragraph 11

Feb 5 (Reuters) - Rapid advances in artificial intelligence, triggered in part by Anthropic's latest automation push, could structurally erode the IT sector's high-margin application services revenues, creating downside risks to earnings and valuations, analysts warn.

Shares in India's software exporters .NIFTYIT settled 0.6% lower on Thursday, a day after plunging 6% in their worst session for nearly six years, as AI-driven automation from U.S.-based Anthropic and Palantir fuelled fears of compressed project timelines and disruption to the industry's labour-intensive business model.

The weakness has echoed across global IT stocks this week, extending a broader selloff in companies seen as most exposed to potential AI disruption.

"There is more pain ahead for Indian IT," Jefferies said, adding that Anthropic's and Palantir's claims highlight how AI could potentially erode application service revenues for IT firms.

"With application services accounting for 40–70% of revenues, firms face growth pressures, and consensus growth estimates do not fully reflect this, posing downside risks to valuations."

DISRUPTION

Indian IT firms have been ramping up AI investments and re-skilling efforts, even as weak global tech spending, delayed client decision-making and pricing pressure have weighed on the sector. Foreign investors offloaded a record $8.5 billion worth of Indian IT stocks in 2025.

However, some analysts said the sharp selloff may be overdone.

JPMorgan said that while concerns around AI disruption were not without merit, it was illogical to extrapolate the launch of some tools to an expectation that companies will replace every layer of mission-critical enterprise software.

Domestic brokerage Kotak Institutional Equities described the decline as a case of "plenty of panic over a little flutter".

Among large IT firms, Tata Consultancy Services TCS.NS, Tech Mahindra TEML.NS and LTIMindtree LTIM.NS have higher exposure to application services, which account for about 55%–60% of revenues, while HCL Tech HCLT.NS has the lowest exposure at around 40%.

Their stocks fell between 4% and 7% % on Wednesday, and extended losses on Thursday.

Brokerage Motilal Oswal estimates that 9%-12% of industry revenues could be eliminated over the next four years due to AI-led disruption.

Jefferies expects AI to weigh on IT-sector revenue growth over the next one to two years, arguing that deflation in legacy service-line revenues will more than offset gains from AI-related opportunities.

The IT sub-index has lost 17% since the start of 2025, including Wednesday's selloff, and is on track for its worst week in over four months.

(Reporting by Kashish Tandon and Bharath Rajeswaran in Bengaluru; Writing by Chandini Monnappa; Editing by Mark Potter and Louise Heavens)

(([email protected]; 8800437922;))

Jan 19 (Reuters) - LTIMindtree Ltd LTIM.NS:

• Q3 CONSOL NET PROFIT 9.71 BILLION RUPEES

• Q3 CONSOL REVENUE FROM OPERATIONS 107.81 BILLION RUPEES; IBES EST. 107.31 BILLION RUPEES

• Q3 RESULTS INCLUDE CHARGE OF 5.9 BILLION RUPEES DUE TO NEW LABOUR CODES

Further company coverage: LTIM.NS

(([email protected];;))

Jan 16 (Reuters) - LTIMindtree Ltd LTIM.NS:

• AWARDED INSIGHT 2.0 PROJECT TO MODERNIZE TAX PLATFORM

• PROJECT VALUED AT 30 BILLION RUPEES WITH 7-YEAR MANDATE

Source text: ID:nBSE5ydQvS

Further company coverage: LTIM.NS

(([email protected];))

By Bharath Rajeswaran and Sai Ishwarbharath B

Jan 8 (Reuters) - India's information technology firms are expected to report another muted quarter, as tepid demand in the U.S. and holiday-period client shutdowns continue to weigh on tech spending, nine brokerages said ahead of earnings.

Brokerages expect the top six IT firms by revenue to post about 4% year-on-year revenue growth and a 5% rise in profit for the December quarter on average, reflecting prolonged demand softness, compared with 6.5% revenue growth in the September quarter.

Indian software exporters last reported double-digit revenue growth in the March quarter of 2023, when digital transformation, cloud adoption and remote-work demand surged in the post-pandemic period.

The broader $283 billion Indian IT industry continues to face macro headwinds, including uncertainty over U.S. tariffs, challenges from proposed $100,000 visa fees, and subdued client spending on concerns about growth in the world's largest economy.

India's IT companies earn a significant share of their revenue from the United States, making the world's largest economy crucial for the sector.

Sector bellwether Accenture's ACN.N recent earnings beat Wall Street expectations on AI-led demand, though its unchanged growth outlook underscores the cautious near-term environment.

Although India has no pure-play AI firms, IT companies are beginning to shape AI strategies through acquisitions and partnerships. Brokerages expect AI momentum to build over the next six months and demand to pick up into 2026.

"Clients remain cautious about committing incremental spending to large programs amid macro and tariff uncertainty and a new tech cycle," said Abhishek Pathak, research analyst at Motilal Oswal Financial Services.

U.S. tariff uncertainty, visa worries and weak spending drove record foreign outflows of $8.5 billion from IT stocks in 2025, nearly half of total foreign exits from Indian equities.

The Nifty IT index .NIFTYIT fell 12.6% in 2025, making it the worst-performing sector as Indian markets lagged Asian and emerging-market peers.

Tata Consultancy Services TCS.NS, the country's largest IT firm, will kick off the earnings season on January 12. Its revenue is expected to rise about 4.2% year-on-year, slower than the 5.6% growth reported last year.

Infosys INFY.NS and HCLTech HCLT.NS are forecast to report year-on-year revenue growth of about 8.1% and 4.6%, respectively, compared with 7.6% and 5.1% in the year-ago period.

Most brokerages do not expect HCLTech to upgrade its fiscal 2026 annual revenue forecast of 2%–3%, or Infosys to raise its forecast of 3%–5%.

Earnings across domestic equities are expected to improve in the December quarter on tax cuts, policy easing, stable growth and benign inflation, even as the period remains structurally weak for IT firms.

Fewer working days due to global client holidays weigh on billing and revenue, while brokerages flag margin pressure from furloughs and wage hikes at firms such as TCS and Wipro WIPR.NS.

However, resilience in the BFSI (banking, financial services and insurance) segment, deal ramp-ups, early signs of artificial intelligence strategy formation and rupee depreciation could offer support by mid-2026, six brokerages said.

(Reporting by Bharath Rajeswaran and Sai Ishwarbharath B in Bengaluru; Editing by Sherry Jacob-Phillips)

(([email protected]; +91 9769003463;))

Oct 27 (Reuters) - LTIMindtree LTIM.NS:

• SECURES $100 MILLION MULTI-YEAR DEAL WITH GLOBAL MANUFACTURER

Source text: ID:nBSE7Xcj9w

Further company coverage: LTIM.NS

(([email protected];))

BENGALURU, Oct 16 (Reuters) - Indian IT services company LTIMindtree LTIM.NS reported a better-than-expected quarterly revenue on Thursday, as its clients increased tech spending in the banking, financial services and insurance sector, its largest segment.

Consolidated sales for the quarter rose 10.2% on-year to 103.94 billion rupees ($1.18 billion), topping analysts' average estimate of 102.37 billion rupees, according to data compiled by LSEG.

($1 = 87.9070 Indian rupees)

(Reporting by Haripriya Suresh)

(([email protected];))

By Bharath Rajeswaran and Haripriya Suresh

BENGALURU, Oct 7 (Reuters) - India's IT firms are set for another lackluster quarter as weak global demand, steep U.S. tariffs and trade jitters weigh on earnings, six brokerages said ahead of results.

Four forecast year-on-year revenue growth of about 6% and a 5.5% profit rise for the September quarter, despite seasonal strength from project cycles.

"September ... will be another muted quarter for IT," said Abhishek Pathak of Motilal Oswal Financial Services.

"As clients reel under macro and tariff uncertainty, there is hesitation to commit additional dollars to any large initiatives."

The projections point to continued single-digit growth, extending an eight-quarter trend as weak U.S. client spending weighs on the sector.

Indian IT firms last saw double-digit revenue growth in the March quarter of 2023, driven by digital transformation, cloud adoption and remote-work demand after the COVID-19 pandemic.

Tata Consultancy Services TCS.NS, India's biggest IT firm, will open the earnings season on October 9 with revenue expected to rise about 2% year on year, compared to up about 8% in the same period last year.

Infosys INFY.NS and HCLTech HCLT.NS are forecast to post revenue growth of about 8% and 9.5% respectively.

Citi Research expects fiscal 2026 to be the third straight sluggish year for IT, while Ambit Capital warned that weak macros and policy uncertainty could cap 2027 rebound.

U.S.-based Accenture ACN.N last month flagged no "meaningful change" in market conditions, while forecasting full-year 2026 revenue below the LSEG-compiled estimate of 5.3%.

Banking and financial services segment is expected to hold up, while manufacturing and retail face tariff and budget pressures, Systematix Institutional Equities said.

A planned $100,000 H-1B visa fee and a proposed 25% U.S. tax on outsourcing have added to industry concerns, with analysts seeing limited near-term impact but potential shifts in delivery models.

Foreign investors have offloaded 678.36 billion rupees ($7.64 billion) of IT stocks in 2025, the biggest sectoral outflow, dragging the Nifty IT index .NIFTYIT down 20% year-to-date against a 6% gain in the Nifty 50 .NSEI.

Still, Axis Securities said the correction in large- and mid-cap IT stocks has improved valuations, offering a better risk-reward even if a sharp rebound takes time.

($1 = 88.7370 Indian rupees)

(Reporting by Bharath Rajeswaran and Haripriya Suresh in Bengaluru; Editing by Nivedita Bhattacharjee)

(([email protected]; +91 9769003463;))

By Sai Ishwarbharath B and Haripriya Suresh

BENGALURU, Oct 6 (Reuters) - Indian IT services company LTIMindtree LTIM.NS announced on Monday that it had won its largest-ever deal, with two sources aware of the matter pegging the size at $580 million.

The sixth largest software services exporter in India said the deal was with a leading global media and entertainment company, but did not disclose the name of the client.

The company did not immediately respond to a request for comment on the size of the deal or the name of the client.

The deal comes at a time when India's $283-billion IT sector is facing macroeconomic uncertainties, tariff-related risks and changes in U.S. immigration policy. India's IT companies will report their numbers for the September quarter starting Thursday, and analysts expect muted results.

LTIMindtree had also announced its now second-largest deal of $450 million in May, which sources said was with U.S. agribusiness giant Archer-Daniels-Midland ADM.N.

The company's shares closed 3% higher on Monday, marking their biggest daily jump in nearly five months.

LTIMindtree said it will play a role in the client's efforts "to streamline operations and modernise delivery models, incorporating automation, process optimisation, and vendor consolidation".

HFS Research CEO Phil Fersht said mid-cap companies such as LTIMindtree, Coforge COFO.NS and Mphasis MBFL.NS are showing momentum in large deal wins as "they're faster and more flexible in shaping AI-led value propositions".

"While the large caps are still optimising legacy portfolios, these mid-caps are winning new logos and expanding into outcome-based, AI-powered deals," he added.

(Reporting by Sai Ishwarbharath B and Haripriya Suresh; Editing by Vijay Kishore)

India File is published every Tuesday. Think your friend or colleague should know about us? Forward this newsletter to them. They can also subscribe here.

Sept 23 - By Ira Dugal, Editor Financial News, with global Reuters staff

U.S. President Donald Trump's move to drastically hike H-1B visa fees will raise Indian technology firms' costs of hiring workers and providing services in the U.S., forcing them to rethink their operating models. It already set them back by nearly $10 billion in lost market value of their shares on Monday, the first day of trading, after the news, but the impact of the decision could go much beyond that. That's our focus this week.

And the Indian central bank is likely to opt for continuity in its inflation targeting framework. Scroll down for more on that.

THIS WEEK IN ASIA-PACIFIC

The candidates vying to be Japan's next leader

Hardest-hit Vietnam risks losing $25 billion from US tariffs, UN estimates

China cracks down on online content inciting hostility, pessimism

UK, Australia and Canada recognise Palestinian state, Israel condemns decision

Trump says 'bad things' will happen if Afghanistan does not return Bagram air base

A NEW 'MAGA' FRONT

Donald Trump has opened a new front in his fight for MAGA, or 'Make America Great Again', by driving up the fees on H-1B visas, used by foreign tech workers, most notably Indians. Train American workers instead, Trump said, making the announcement.

The decision put the tech industry squarely in the middle of the global trade and immigration tensions, leaving Indian firms rethinking their plans and policymakers calculating the wider hit from Trump's latest salvo.

The initial announcement - which suggested an annual fee of $100,000 on anyone with an H-1B visa entering the U.S. from September 21 compared with just a few thousand dollars previously - sparked panic, with companies asking workers who hold such visas and are overseas to rush back. Travellers cancelled plans and scrambled to find flights to the U.S.

India's foreign ministry said the move could disrupt families, adding that the U.S. and India have both benefited from mobility of skilled workers.

The final version, however, was watered down, imposing a one-time fee on new visas only. Nevertheless, global tech executives have pushed back, warning of rising costs for large companies and startups.

While Amazon AMZN.O uses the largest number of H-1B visas, leading Indian IT services firms are all among the top-10 sponsors of the visas. And Indians are the biggest beneficiaries of these temporary work permits.

Analysts expect the immediate financial impact on margins and profitability to be manageable but warn of rising uncertainties for the sector. Brokerage ICICI Securities pegged the average hit on earnings per share at about 6% while Jefferies estimated it at 4%-13% for different firms based on the nature of business and use of these visas. They did not specify the time period for the profit hit.

Read here to understand the impact on India's IT services model.

In response, the Nifty IT index .NIFTYIT fell 3% on Monday, wiping out nearly $10 billion in market value. The index of IT stocks has been the worst performer among sectoral indices in the Indian market so far this year, down 18% compared to a 6% gain for the benchmark Nifty 50 .NSEI.

RIPPLE EFFECTS WILL BECOME EVIDENT LATER

The wider implications of a clampdown on Indian tech workers in the U.S. will only play out over time.

With fewer such professionals welcome in the U.S., wage growth in the domestic industry could be hurt at a time when a squeeze on profitability and increased use of AI have already brought on job cuts.

The sector, which employs 5.67 million people, is a significant driver of demand in the Indian economy.

Citi analysts believe remittance flows from the U.S. could also be impacted over time but added that quantifying the impact is difficult.

Displaced workers could find a home in other countries such as Britain and South Korea, which are looking at easier visa policies to attract talent.

Some analysts believe the visa fee hike may eventually benefit India by increasing offshoring via global capability centres (GCC), used by foreign firms for a range of services from accounting to research, which have powered up the country's services exports in recent years.

The H-1B shock and increasing uncertainty "could accelerate GCC trajectory and lift GCC exports as a share of India’s total services exports over time," said Madhavi Arora, chief economist at Mumbai-headquartered Emkay Global Financial Services.

But this growth also could be short-circuited.

A bill known as the HIRE Act and introduced by U.S. Republican Senator Bernie Moreno has made the industry nervous. Any version of the bill, which proposes taxing companies that hire foreign workers over Americans, could limit the offshoring opportunity.

"If the repercussion of this (H-1B fee increase) is substantial offshoring, it might invite a reaction in terms of service tariffs or offshoring taxes," brokerage house Ambit Capital said in a note.

How will Trump's latest move impact India's tech sector and the broader economy? Write to me at [email protected].

MARKET MATTERS

India's central bank is likely to recommend maintaining the inflation target of 4% for another five years, Reuters reported.

The inflation targeting framework is up for review by March 2026.

The continuation of the target means predictability in the trajectory of interest rates but also leaves room for at least one more cut this year as headline inflation remains within the central bank's target while core inflation has been stickier.

The Reserve Bank of India had sought views on whether the target should be changed from headline inflation to core inflation and if the target band should be different from the current 2%-6%.

With most stakeholders backing the current framework, the central bank is likely to suggest its continuation to the government.

THIS WEEK'S MUST-READ

European Union nations are keeping a close watch on any wildlife export requests from India and, in particular, Vantara, a private zoo run by the philanthropic arm of a conglomerate controlled by Asia's richest family, the Ambanis.

Indian investigators cleared the sanctuary of any wrongdoing this week but its operations continue to draw global scrutiny.

Read here to know why the Spix's macaw, a vivid-blue parrot, found itself in the middle of controversy around Vantara.

(Reporting by Ira Dugal; Editing by Muralikumar Anantharaman)

(([email protected]; +91-9833024892;))

By Haripriya Suresh and Urvi Dugar

BENGALURU, Sept 11 (Reuters) - India's massive IT sector faces a lengthy period of uncertainty with customers delaying or re-negotiating contracts while the U.S. debates a proposed 25% tax on American firms using foreign outsourcing services, analysts and lawyers said.

The sector is likely to be on the receiving end of a bill which, though unlikely to pass in its nascent form, will initiate a gradual shift in how big-name firms in the world's largest outsourcing market buy IT services, they said.

Still, with U.S. firms having to pay the tax, those heavily reliant on overseas IT services are likely to push back, setting the stage for extensive lobbying and legal battles, analysts and lawyers said.

India's $283 billion information technology sector has thrived for more than three decades exporting software services, with prominent clients including Apple AAPL.O, American Express AXP.N, Cisco CSCO.O, Citigroup C.N, FedEx FDX.N and Home Depot HD.N. It has grown to make up over 7% of GDP.

However, it has also drawn criticism in customer countries over job loss to lower-cost workers in India.

Last week, U.S. Republican Senator Bernie Moreno introduced the HIRE Act which proposes taxing companies that hire foreign workers over Americans, with the tax revenue used for U.S. workforce development. The bill also seeks to bar firms from claiming outsourcing payments as tax-deductible expenses.

The bill could not have come at a worse time for India's IT sector, which is struggling with weak revenue growth in its mainstay U.S. market as clients defer non-essential tech spending amid inflationary pressure and tariff uncertainty.

"The HIRE Act proposes sweeping changes that could alter the economics of outsourcing and significantly increase the tax liability associated with international service contracts," EY India's compliance head Jignesh Thakkar said.

In some cases, combined federal, state and local taxes could push the levy on outsourced payments as high as 60%, Thakkar said.

"While its partisan proposal may seem initially attractive, it's ultimately an artificial cost which makes organisations less competitive and profitable globally," said Arun Prabhu, partner at Cyril Amarchand Mangaldas.

Even so, the idea is gaining traction. This month, White House trade adviser Peter Navarro reposted a call from far-right activist Jack Posobiec for tariffs on services, not just goods.

"When political noise turns into regulatory risk, clients quickly insert contingencies, reopen pricing and demand delivery flexibility," said HFS Research President Saurabh Gupta.

"Clients will simply take longer to sign, longer to renew, and longer to commit transformation dollars," Gupta said.

Industry body Nasscom and IT firms Tata Consultancy Services TCS.NS, Infosys INFY.NS, HCLTech HCLT.NS, Tech Mahindra TEML.NS, Wipro WIPR.NS and LTIMindtree LTIM.NS did not respond to requests for comment on implications of the bill.

BACKLASH BECKONS

Companies are likely to lobby hard against the proposed bill and challenge it legally if passed, legal experts and industry watchers said.

"A bill like this would probably face a lot of backlash from U.S. companies that rely heavily on outsourcing, who would likely bring litigation to challenge various aspects of the bill, if it were ever to be passed into law," said Alcorn Immigration Law CEO Sophie Alcorn.

Sweeping restrictions are unlikely given the practical hurdles in enforcing the bill's provisions, experts said.

"More likely is a diluted version, with narrower provisions or delayed enforcement," said HFS Research CEO Phil Fersht.

The bill could also affect U.S. firms' global capability centres (GCCs), which have evolved from low-cost offshore back offices to high-value innovation hubs that support operations, finance, research and development.

"It will be hard to pull back from existing work, but new set-ups and expansion may get impacted," said Everest Group partner Yugal Joshi.

The proposed tax will impact the cost arbitrage advantage that is among the deciding factors when establishing a GCC, said Bharath Reddy, a partner at CAM.

"However, the lack of availability of appropriate human capital in the U.S. will continue as a problem, and which can be addressed in the near future only through outsourcing," he said.

(Reporting by Haripriya Suresh and Urvi Dugar in Bengaluru; Editing by Dhanya Skariachan and Christopher Cushing)

(([email protected];))

Adds reporters' bylines

By Sai Ishwarbharath B and Haripriya Suresh

BENGALURU, Aug 8 (Reuters) - Indian outsourcing giant Tata Consultancy Services' TCS.NS decision to cut over 12,000 jobs signals the start of a broader AI-fueled trend that could end up eliminating around half a million jobs over the next two to three years from the $283 billion sector, experts said.

While TCS pegged the move to shed 2% of its workforce to skill mismatches rather than AI-related productivity gains, experts viewed the largest-ever layoffs by India's top private employer as the beginning of things to come in the labour-intensive sector. Roughly 12,200 TCS middle and senior management jobs will be lost.

The industry, which has played a crucial role in creating a middle class in India, is increasingly seeing AI being used for everything from basic coding to manual testing and customer support.

The sector employed 5.67 million people as of March 2025 and accounted for over 7% of India's GDP. It has a huge multiplier effect due to the direct and indirect jobs it creates and the cars-to-homes consumption it drives in the world's fifth-largest economy.

It has historically absorbed a majority of India's engineers but that will change as rising AI use ekes out more efficiencies and demands newer skills that many current employees lack, according to half a dozen industry veterans, analysts, and staffing firms.

"We are in the midst of a massive transition that will transform white-collar work as we know it," said Silicon Valley-based Constellation Research founder and chairman Ray Wang, echoing other experts who warned that more layoffs are likely on the cards.

The most vulnerable employees include pure people managers with minimal tech knowledge, those in charge of testing or identifying bugs and ensuring user-friendliness before delivering software to clients, and infrastructure management staff who provide basic tech support and ensure networks and servers are working well, experts said.

"About 400,000 to 500,000 professionals are at risk of being laid off over the next two to three years as their skills don't match client demands," tech market intelligence firm UnearthInsight's founder Gaurav Vasu said, adding that about 70% of those layoffs would impact workers with 4-12 years' experience.

"This (fear stemming from TCS layoffs) may hurt consumer demand for tourism, luxury shopping and even delay long-term investments such as real estate," Vasu said.

TCS and its peers Infosys INFY.NS, HCLTech HCLT.NS, Tech Mahindra TEML.NS, Wipro WIPR.NS, LTIMindtree LTIM.NS, and Cognizant CTSH.O collectively employ over 430,000 workers with 13 to 25 years of experience, according to staffing firm Xpheno.

"At the moment, they may appear like the big fat middle layer," Xpheno's co-founder Kamal Karanth said. None of the IT firms responded to Reuters queries seeking comment.

"With cost optimization being the key driver for new deal wins, clients are asking for productivity benefits - a trend which is also growing due to the rise in AI adoption. This requires IT firms to do more work with the same number of employees or the same work with fewer employees," Jefferies analyst Akshat Agarwal said in a research note.

ADAPT OR PERISH

TCS, which had more than 613,000 workers before the layoffs, said in its late July announcement it was gearing up to be "future-ready" by investing in new technologies, entering new markets, deploying AI at scale for its clients and itself, and realigning its workforce model. It did not answer Reuters queries on how many layoffs were tied to AI adoption and why it could not redeploy the affected employees.

"This is very devastating news," said a 45-year-old, Kolkata-based TCS employee affected by the latest layoffs. "It is very difficult for people my age to get new jobs."

Some others who are still at TCS fretted over its mediocre performance bonuses for senior employees in recent quarters, a new "bench policy" that limits the time somebody could be without a project regardless of personal circumstances or past performance, on-boarding delays, and the emotional turmoil caused by the layoffs.

"All these developments have tanked the morale of mid-career folks like me," a Pune-based TCS employee said.

The Indian outsourcing sector has been a key employment engine since the 1990s, offering upward mobility to millions of engineers. But revenue growth has weakened recently as its clients, stung by inflation and U.S. tariff uncertainty, defer discretionary spending and demand better cost management.

"The tech industry is at an inflection point, as AI and automation move to the very core of how businesses operate," industry body Nasscom said.

During past tech revolutions, disruption was felt at the organisational level.

"With AI, for the first time, the onus is on the individual to reinvent or re-skill themselves," former Tech Mahindra CEO CP Gurnani said.

(Reporting by Sai Ishwarbharath B and Haripriya Suresh; Editing by Dhanya Skariachan and Kim Coghill)

(([email protected]))