Shares of Tata Consultancy Services (TCS) shed 0.3% in a firm market on Friday after the unexpected exit of chief executive officer, Rajesh Gopinathan, from the firm.
Analysts said investors are unlikely to be perturbed by the choice of Gopinathan’s successor, K Krithivasan — a TCS veteran— , a move that could ensure a smooth succession.
But, they expect the change to weigh on the stock in the near term. The TCS stock closed at Rs 3,175 on Friday. The Nifty gained 0.7% to close at 17,100. ET looks at what top brokerages are saying about the change of guard at India’s second-most valuable listed company.
BANK OF AMERICA SECURITIES
While a surprise CEO change always adds a degree of uncertainty for a stable and well-performing company, it’s unlikely to be a source of significant concern for investors
Change comes amid largely stable market conditions (technology cycle and competitive dynamics)
Immediate backfill reduces uncertainty; succeeded by another TCS veteran; Tata Group chairman N Chandrasekaran’s high degree of familiarity with TCS
BERNSTEIN
Unexpected CEO change could bring volatility amongst weak macro and rebuilding competition
(TCS) Has had the most stable leadership amongst peers with only 4 CEOs (all internal) during its history
Expected to continue its strategy on large cost take-out deals under the new CEO
CLSA
Transition likely to be smooth; expect a minimal business impact from the change
Succession planning could become a point of focus for long-term investors; Age of TCS’s senior leadership – Krithivasan-58 years old and N Ganapathy Subramaniam-63 years old
JPMORGAN
Unexpected CEO departure could lead to periods of volatility amid weaker tech spend and rapidly evolving macro
New CEO should keep strategies largely unchanged but has big shoes to fill after a period of rapid growth and signifi cant value creation
TCS’s rich valuations in a weakening macro make a CEO change a likely derating driver
MACQUARIE
Krithivasan in his late 50s; Another CEO change is likely in a few years
Medium-term question of succession will loom large, but that is not an immediate issue
Chandrasekaran could take a more active role in preparing another successor
MORGAN STANLEY
The Resignation comes as a surprise and may create a short-term overhang for the stock
Expect the transition to be smooth and well-managed, as seen in the past
Stock unlikely to underperform in coming months, going by past experience
