Tough immigration rules in US may hit Cognizant hardest
BIBHU RANJAN MISHRA
The proposed comprehensive immi- gration reforms Bill in the United States would affect all major off-shore-centric information services companies. But it is expected that the Nasdaq-list-ed Cognizant would be hit the hardest, considering the company’s low margin bandwidth high exposure to the US market.
According to a recent report by global
equity analyst firm JP Morgan, Cognizant’s
earning per share — used to gauge a company’s profitability — could be hit by as
much as 25 percent, after the reforms are
This is primarily because the company
operates on a thin operating margin and its
exposure to the US is higher, compared to
the rest of the pack.
The JP Morgan report is based on a presentation Tata Consultancy Services,
Cognizant, Infosys and Wipro made at its
annual global technology, media and telecom conference in Boston last month.
‘Cognizant may be the most vulnerable to
the Bill, as its (estimated) CY14 earning per
share has been hit as much as 25 percent...
Cognizant is the most vulnerable, primarily
because of its lower margins and its higher
percentage of revenues from the US,’ the
report said. ‘In any case, we see FY15/CY14
EPS of all the four firms being impacted by
The Bill, mooted by bipartisan senators,
known as the ‘gang of eight,’ cleared its first
major hurdle June 11, with the Senate
clearing it for a debate. The Senate offered
about 100 amendments to the original leg-
Historically, Cognizant’s operating margin has been 19-20 percent, something the
CHIP SOMODEVILLA/GE TT Y IMAGES
Cognizant President and CEO Francisco D’Souza, second from left, at a business roundtable in
Washington, DC last year. The company’s exposure to the US is the highest compared to its peers, with
close to 80 percent of its revenues coming from there.
company considers a necessity to stay
healthy by investing profits back into the
For the quarter ended March, the company’s operating margin stood at 19.9 percent.
The company’s exposure to the US is the
highest compared to its peers, with close to
80 percent of its revenues going from here.
TCS, India’s second-largest IT services
company, might be hit the second-hardest,
with its EPS expected to be impacted by
about 18 percent, followed by Infosys (15
Wipro and HCL Technologies were relatively better placed, the report said.
It added most companies expected the
Senate’s version of the Bill to go through
essentially unchanged, though they
remained optimistic the House’s version
would be less onerous.
However, companies feel the ‘
outplace-ment’ clause in the Bill is likely to be
intensely negotiated with stakeholders,
The clause debars sending H-1B spon-
sored employees of H-1B-dependent firms
(those with more than 15 percent of US
employees as H-1B ones) to client sites in
By arrangement with
Apollo Tyres to buy Cooper Tire
Largest outbound deal involving an Indian auto firm
to see birth of world’s 7th-largest tire maker
Apollo Tyres said June 12 that it would acquire the Ohio-headquartered Cooper Tire & Rubber Company in an all-cash transaction valued at
approximately $2.5 billion.
The company executed a definitive merger agreement
under which a wholly-owned subsidiary of Apollo would
acquire Cooper, Apollo Tyres said in a statement.
‘Under the terms of the agreement, which has been unanimously approved by the boards of directors of both companies, Cooper stockholders will receive $35.00 per share
in cash,’ it said.
The transaction represents a 40 percent premium to
Cooper’s 30-day volume-weighted average price, it added.
Onkar S Kanwar, chairman, Apollo Tyres, said, ‘ This trans-
formational transaction provides an unprecedented oppor-
tunity to serve customers across a host of geographies in
both developed and fast-growing emerging markets
around the world.’
He added, ‘The combined company will be uniquely posi-
tioned to address large, established markets, such as the
US and the European Union, as well as
the fast-growing markets of India,
China, Africa, and Latin America where
there is significant potential for further
The combined company will be the
seventh-largest tire company in the
world and will have a strong presence in
high growth end-markets across four
continents, Apollo Tyres said, adding
‘With a combined $6.6 billion in total
sales in 2012, the combined company
will have a full range of brands and
greater ability to satisfy customer needs
Roy Armes, chairman and president,
Cooper Tire & Rubber Co, said the deal was a compelling
transaction that was in the best interest of Cooper’s stock-
holders and offered attractive benefits to its customers and
DANISH SIDDIQUI/REU TERS
An employee works inside a showroom selling Apollo Tyres in Mumbai June 13. The company
currently doesn’t operate in the US.
‘Together, our two organizations have almost no geographic overlap and significant opportunities for growth,’
–Press Trust of India