Jefferies says India's new labour codes to add to margin pressures for IT companies

LTM

13/01/2026 05:30

** India's new labour codes to increase recurring employee costs for information technology companies, along with a large one-time impact in Q3

** On Monday, IT companies TCS TCS.NS and HCLTech HCLT.NS reported one-time charge of 21.3 billion rupees and 9.6 billion rupees, respectively, to factor in new labour codes

 ** India's new
labour codes
, which came into effect in November, require employee wages to be at least 50% of cost to company, and benefits like provident fund and gratuity to be determined based on wages

** "New labour codes will add to the margin pressures from slower revenue growth, AI-led business mix change and potentially higher onsite wage hikes in FY27/28 due to changes in H-1B visa norms," Jefferies says

** Adds that a 2% increase in Indian employee costs may hit FY27 earnings estimates by 2%-4% for IT companies

** Companies will likely offset some impact through lower wage hikes, particularly at senior level

** IT stocks .NIFTYIT rise 0.1% on the day

(Reporting by Vivek Kumar M)

((VivekKumar.M@thomsonreuters.com;))