brokerages: What top brokerages are saying about leadership change at TCS

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