Home / Markets / Stock Markets /  TCS shares: What CEO Rajesh Gopinathan's surprise resignation means for the IT stock?

IT giant Tata Consultancy Services (TCS) announced the resignation of Rajesh Gopinathan as CEO and the appointment of K Krithivasan as the new CEO designate for TCS. K Krithivasan will go through a transition period with Rajesh Gopinathan and will be appointed as MD & CEO in the next Financial Year.

Rajesh Gopinathan was re-appointed as CEO last year and therefore his resignation is a surprise and likely to be perceived negatively. However, Krithivasan’s expertise in the BFSI space as well as the internal promotion of a TCS veteran who has worked closely with the outgoing CEO for over 2 decades, should help TCS from a long term perspective. The company has continued to deliver on strong revenue growth, deal pipeline and improving margins over the past few quarters. We expect TCS' revenue/EBITDA/PAT to grow at 13%/14%/14% between FY22-25E," said Centrum Broking which has maintained its ADD rating on the TCS shares at a target price of 3,607.

The announcement is a surprise given Mr Gopinathan’s track record and long association with TCS. Even so, analysts at Nuvama Research believe TCS has among the strongest leadership bench in the industry; hence, the transition shall be as smooth as when Mr Gopinathan had taken over the reins from Mr Chandrasekaran, who was promoted as Chairman of Tata Group.

“We, however, view this is as a continuation of a trend at TCS, wherein baton shall be passed from one veteran to another. In the 55 years of TCS’s history, Mr Krithivasan will only be its fifth CEO—a testimony to stability and quality of its management. We see nil disruption from this management transition. Any drop in the stock price must be used as an opportunity to add as valuation is no longer expensive, which makes risk reward profile attractive," they added while maintaining ‘Buy’ on the IT stock with a target price of 4,100.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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