Mid-cap IT firms better positioned amid AI adoption and H-1B changes: Equirus Capital

Mid-cap IT companies could be better positioned than their large-cap peers as enterprise demand improves and AI-led upskilling gains momentum, even as hiring models adjust to recent changes in the H-1B visa framework, according to Sandeep Gogia, Managing Director and Sector Lead – Tech & Digital at Equirus Capital.

His comments follow the Department of Homeland Security’s major overhaul of the H-1B visa programme, replacing the random lottery with a weighted selection system favouring higher-skilled and higher-paid foreign workers.

Gogia said Indian IT firms are likely to respond with increased local hiring and offshoring, while mid-cap players, being more specialised and nimble, could benefit as AI adoption by enterprise clients and BFSI spending support mid- to high-single-digit growth in fiscal year 2026-27 (FY27).

These are edited excerpts of the interview.

Q: What’s your take on this change that has come by? And do you think it could impact the industry, if not the big companies, then the mid- and small-sized IT companies a lot?

A: I don’t think it will have a very large impact. And I’ll stick to that ‘minimal impact’ that you also heard earlier. So, look, what will happen is that a lot of these companies will start hiring locally, rather than using this route to send people outside. And second, I see a lot of work getting offshored. So I think, with a mix of these two, overall, the impact won’t be meaningful or material on the margins for the whole industry.

Q: In terms of the statistics, TCS only had around 500 H-1B travellers in the year gone by. Infosys also said it was a minor proportion. Wipro said over 80% of the US workforce is localised. How much of that trend do you expect would possibly now increase? Does 80% go to 100%? Does 500 go to, say, 100? What are you expecting now in possibly FY27, FY28?

A: This will reduce further. There is no doubt. And as I said, if you look at the two points that I made — one is that more work will get offshored, so that reduces the requirement to have more H-1B visas. And second is, if you hire locally — US green card holders and citizens — that further reduces the need. Both of these put together, overall, the industry will start reducing its dependence on this visa.

Q: Do you think specifically, when you look at Infosys, they have said that it was very minimal, right? And even Persistent Systems has said that they were never dependent on H-1B visas. Do you think that mid-tier IT companies will have an upper hand over large-cap IT companies?

A: I don’t think it will have a meaningful impact on either of those two sets of organisations. Because the mid-cap is now still about billions of dollars of revenue. There are many meaningfully large organisations now, and given their scale, I think they have the flexibility to manage this successfully with little or no impact.

Also Read | ‘Minimal Impact on IT’: BNP Paribas analyst explains the H-1B Visa norms impact on Indian stocks

Q: Also, just an industry-wide conversation on that, then — do you think Indian IT companies will invest more in upskilling talent? Because now it is based on skills. It is not a random system anymore, and that is where most of their expenditure would go, absolutely.

A: That’s already happening. And then AI, in any case, is one of the drivers for that, where both mid-tier and top-tier organisations are spending a meaningful amount on upskilling and training their employees to get them up to speed with the new-age requirement of using and embedding AI in the work that they offer.

Clients are expecting productivity gains and the passing on of some of those gains to them. So, as a result, there is active spending and engagement happening on that side.

Q: How would you place IT stocks going into FY27, where we would possibly get more structural leads in terms of where the winds are blowing when it comes to the Trump administration as well as AI?

A: There are green shoots emerging. If you look at CY26 or FY27, we see that banks — the BFSI sector — have already started to open up their wallets in terms of budgets. With clarity emerging on the tariff side gradually, even the manufacturing sector is expected to follow suit.

The growth will stay muted, but the expectation is that it will be better than the last couple of years, both of which have been muted.

Q: So maybe mid-single-digit growth, I believe, is what one could see coming in?

A: Yes, mid- to high-single-digit growth.

Q: What is your pecking order in the IT pack — large cap, mid cap? How are you looking at IT?

A: The mid-caps are more nimble-footed and more specialised in terms of their offerings. Therefore, I would pick a mid-cap over a large-cap today.

Q: The next big talking point has been AI, but another concern the industry and the market generally have is that there are not enough AI investments being made by IT companies right now, versus what we are seeing abroad — be it the US or the rest of Asia — compared to India. Do you think this is something the market will watch out for and that AI investments could be the next trigger for the industry?

A: Yes, I agree. The reason this has not happened so far is that AI adoption on the enterprise side has been limited compared to adoption on the retail side. There are data privacy concerns, hallucination concerns, and cybersecurity risks involved.

As enterprise clients start adopting AI to a higher degree, I see that happening in parallel on the IT services side as well. Both have to go hand in hand.

Second, the capex happening on the AI infrastructure side is large, and that will be followed by the services cycle — investments on the services side. With these two factors, I believe there is a strong upside that we will see over the next two to three years, with increasing adoption of AI by enterprise clients.

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