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TCS Shares Trade Lower After CEO Rajesh Gopinathan’s Exit; What Analysts Say About IT Stock

Last Updated: March 17, 2023, 12:44 IST

Tata Consultancy Services (TCS) CEO Rajesh Gopinathan’s resignation has come as a surprise for the Street. IT giant announced the appointment of K Krithivasan as the new CEO designate for TCS. K Krithivasan will go through a transition period with Rajesh Gopinathan and will be appointed as MD & CEO in the next Financial Year.

Shares of Tata Consultancy Services marginally declined in the morning trade on Friday.

On the BSE, the scrip opened at Rs 3,151 after it had closed at Rs 3,184.75 on Thursday. After touching an intra-day high of Rs 3,194, the stock was down 0.62 per cent to Rs 3,165.

The market valuation of TCS, a key constituent of Sensex, stood at Rs 11,58,419.07 crore on the BSE.

On the NSE, the company was down 0.47 per cent to Rs 3,169.90. It had opened at Rs 3,150.50 after ending the day at Rs 3,185 on Thursday.

Here’s What Analysts Say About the TCS Stock

Citi has maintained a ‘sell’ call on TCS calling Gopinathan’s resignation as a surprise for D-Street. The appointment of K Krithivasan should be more about continuity, it noted, adding that Krithivasan has been in TCS for 34 years now. The changes to strategy, if any, brought by him will be keenly awaited, the brokerage firm further said.

Given relatively limited investor interactions, the Street will keenly look forward to interacting with the CEO designate, Citi said. TCS shares were trading at Rs 3,167.05 on the NSE and were down by Rs 17.95 or 0.56 per cent against Thursday’s closing price.

“Rajesh Gopinathan was re-appointed as CEO last year and therefore his resignation is a surprise and likely to be perceived negatively. However, Krithivasan’s expertise in the BFSI space as well as the internal promotion of a TCS veteran who has worked closely with the outgoing CEO for over 2 decades, should help TCS from a long-term perspective. The company has continued to deliver on strong revenue growth, deal pipeline and improving margins over the past few quarters. We expect TCS’ revenue/EBITDA/PAT to grow at 13 per cent/14 per cent/14 per cent between FY22-25E,” said Centrum Broking which has maintained its ADD rating on the TCS shares at a target price of Rs 3,607.

Analysts at Nuvama Research believe TCS has among the strongest leadership bench in the industry; hence, the transition shall be as smooth as when Gopinathan had taken over the reins from Chandrasekaran, who was promoted as Chairman of Tata Group.

“We, however, view this is as a continuation of a trend at TCS, wherein baton shall be passed from one veteran to another. In the 55 years of TCS’s history, Krithivasan will only be its fifth CEO—a testimony to stability and quality of its management. We see nil disruption from this management transition. Any drop in the stock price must be used as an opportunity to add as valuation is no longer expensive, which makes risk reward profile attractive,” they added while maintaining ‘Buy’ on the IT stock with a target price of Rs 4,100.

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