Rajesh Gopinathan's resignation as TCS MD & CEO takes the street by surprise

TCS MD & CEO Rajesh Gopinathan quit on Thursday after six years at the helm of affairs at the company. K Krithivasan has been appointed as the Chief Executive Officer-designate, effective from March 16, 2023.

The sudden announcement of Gopinathan's departure has caught analysts by surprise. While there is consensus on the fact that the announcement was sudden, some believe that this has happened in an uncertain year.

Brokerage firm JPMorgan believes that the surprise change at the top has come in a year where momentum is slowing down. It said that an unexpected CEO departure could lead to periods of volatility in a time of weaker tech spends and rapidly evolving macro.

The firm further said that the new leader will have big shoes to fill after a period of rapid growth and significant value creation from capital returns.

JPMorgan has an underweight rating on TCS with a price target of Rs 3,000.

Citi says that given the limited investor interactions, the street will keenly look forward to interact with the CEO-designate. "While the appointment of Krithivasan should lead to more continuity, changes to strategy will be keenly awaited if any," the note said. Citi has a sell recommendation on TCS with a price target of Rs 2,9990.

A new CEO has joined during a challenging macro environment and near-term growth pressures, according to Bernstein. However, an unexpected CEO change could bring volatility amongst weak macro and rebuilding competition. Bernstein has an overweight on TCS with a price target of Rs 3,840.

Morgan Stanley is of the opinion that the CEO resignation may create a short-term overhang on TCS shares. However, it expects the transition to be smooth, as has been the case in the past. The stock is unlikely to underperform in the coming months, according to Morgan Stanley.

CLSA has an outperform rating on TCS with a price target of Rs 3,550. While it expects the CEO transition to be smooth, it said that the age of TCS' senior leadership, succession planning could become a point of focus, especially for long-term investors. CEO-designate Krithivasan is 58 years old, while COO N Ganapathy Subramaniam is 63 years old.

Shares of TCS is trading 0.4 percent lower at Rs 3,171.30.