The huge restrictions on the number of H1-B visas for Indian nationals visiting the United States and a backlash against outsourcing are likely to have an 'adverse impact' on the future prospects of Tata Consultancy Services Ltd.

"Most of our employees are Indian nationals and providing services in the US, Europe and other countries depend on our ability to obtain necessary visas and work permits," TCS said in its draft prospects filed with Securities and Exchange Board of India.

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TCS's software professionals work in US on H1-B or L-1 visas, and with that country reducing H1-B visas on October 1, 2003, to 65,000 from the earlier 195,000, would limit the company's ability to conduct operations in US, it said.

Further, US government has also increased the level of scrutiny in granting visas, apart from hiking visa processing fees, it said. The demand for H-1B visas would 'continue to be high,' but these restrictions would make it difficult to obtain 'as many H-1B visas as in the past,' it added.

TCS said it was possible that proposed legislation in US would impose stringent laws on the granting of H1-B and L-1 visas, which would have an 'adverse impact on our business and profitability.'

The software major also said that political opposition to outsourcing in US and other countries where it has a presence, could 'adversely affect our business.'

Over 60 per cent of TCS's revenues are from its businesses in US, through onshoring and offshoring.

Recently, outsourcing has been a subject of intense political debate, including the campaign for the US presidential elections. Offshoring has come under 'increased scrutiny' within US due to its 'perceived association with loss of jobs' and this also resulted in several state governments in that country planning to implement restrictions on outsourcing, according to the prospectus.

In November 2003, State of Indiana had cancelled a contract with TCS, under which the company was to provide certain services to the Department of Workforce Development.

At present, TCS does not provide any 'significant' back-office services to US federal or state government entities, and do not have any significant contracts with such entities, it added. Any changes in US to existing laws or the enactment of new legislation restricting offshore outsourcing, particularly by private companies may also "adversely impact our business and profitability," it added.