TCS shares: What CEO Rajesh Gopinathan’s surprise resignation means for IT stock

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Rajesh Gopinathan, the CEO of IT behemoth Tata Consultancy Services (TCS), announced his departure, and K Krithivasan was named as Gopinathan’s replacement. Rajesh Gopinathan and K Krithivasan will go through a transitional period before K Krithivasan is named MD & CEO for the upcoming fiscal year.

“Rajesh Gopinathan’s retirement is unexpected and likely to be seen poorly because he was reappointed CEO last year. On the other hand, Krithivasan’s experience in the BFSI sector and the internal elevation of a TCS veteran who has collaborated closely with the departing CEO for more than 20 years could benefit TCS in the long run. For the past three quarters, the company has maintained its excellent sales growth, deal pipeline, and growing profitability. We anticipate TCS’ revenue, EBITDA, and PAT to expand at rates of 13%, 14%, and 14%, respectively, between FY22 and FY25E, according to Centrum Broking, which has kept its ADD rating on TCS shares at a target price of 3,607.

Given Mr. Gopinathan’s track record and extended affiliation with TCS, the announcement is unexpected. But, according to experts at Nuvama Research, TCS has one of the strongest leadership teams in the sector, so the changeover will go as smoothly as when Mr. Gopinathan took over from Mr. Chandrasekaran, who was elevated to Chairman of the Tata Group.

Yet, we see this as continuing a TCS tradition where the torch is passed from one veteran to another. Mr. Krithivasan will be TCS’s sixth CEO in the company’s 55-year existence, a testament to the stability and calibre of its leadership. We observe no impact from this managerial change. Although valuation is no longer costly, which makes risk reward profile attractive, any decline in the stock price must be taken as an opportunity to add, they continued, maintaining a rating of “Buy” on the IT company with a target price of 4,100.

The opinions and suggestions listed above are not Currency Veda’s; rather, they represent the opinions of certain analysts or brokerage firms.