TCS shares trade lower after CEO Rajesh Gopinathan exit; What analysts are saying about IT stocks

Last updated time: 17 March 2023, 12:44 IST

The resignation of Tata Consultancy Services (TCS) CEO Rajesh Gopinathan came as a surprise to the street. The IT giant has announced the appointment of K Krithivasan as the new CEO of TCS. K Krithivasan will undergo a transition period with Rajesh Gopinathan and will be appointed MD and CEO in the next financial year.

Shares of Tata Consultancy Services were marginally lower in morning trade on Friday.

On the BSE, the scrip opened at Rs 3,151 after closing at Rs 3,184.75 on Thursday. After touching an intraday high of Rs 3,194, the stock closed down 0.62 percent at Rs 3,165.

The market price of TCS, a major component of the Sensex, stood at Rs 11,58,419.07 on the BSE.

The company was down 0.47 percent at Rs 3,169.90 on the NSE. It opened at Rs 3,150.50 after ending the day at Rs 3,185 on Thursday.

Here’s what analysts are saying about TCS stock

Citi has backed a ‘sell’ call on TCS, calling Gopinathan’s resignation a surprise for D-Street. The appointment of K Krithivasan should be more about continuity, he noted, adding that Krithivasan has been with TCS for 34 years. Changes in strategy, if any, will be eagerly awaited, the brokerage firm further said.

Given the relatively limited investor interaction, the Street looks forward to interacting with the CEO appointee, Citi said. Shares of TCS were trading at Rs 3,167.05 on the NSE, down by Rs 17.95, or 0.56 per cent, from Thursday’s closing price.

“Rajesh Gopinathan was reappointed as CEO last year, so his resignation is unexpected and may be viewed negatively. However, Krithivasan’s experience in the BFSI space as well as the internal promotion of a TCS veteran who worked closely with the outgoing CEO for over 2 decades should help TCS in the long run. The company has continued to deliver strong revenue growth, deal pipeline and improved margins over the past few quarters. We expect TCS Revenue/EBITDA/PAT to grow at 13%/14%/14% between FY22-25,” said Centrum Broking, which maintained its ADD rating on TCS stock with a target price of Rs 3,607.

Nuvama Research analysts believe that TCS has the strongest leadership position in the industry; hence, the transition will be seamless, as was the case when Gopinathan took over from Chandrasekaran, who was promoted to Tata Group chairman.

“However, we believe this is a continuation of the trend at TCS where the baton is passed from one veteran to another. In the 55-year history of TCS, Krithivasan will be its fifth CEO, a testament to the stability and quality of its management. We see zero disruption from this management transition. Any dip in share price should be used as an opportunity to add as valuations are no longer expensive, making the risk-reward profile attractive,” they added, maintaining Buy on the IT stock with a target price of Rs 4,100.

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