TCS promises smooth transition after CEO's surprise resignation

The move might not be disruptive as a longtime insider was taking over, analysts said

IT behemoth Tata Consultancy Services promised a smooth leadership transition and tried to reassure investors about its future growth prospects, a day after the surprise resignation of its chief executive Rajesh Gopinathan.

K Krithivasan, who heads the company’s banking, financial services, and insurance arm, has been nominated as the CEO-designate by its board. He will take over in the next financial year from Gopinathan, who will stay with TCS until September 15.

“This is not rocket science. Both of us have worked together a lot and our teams are also very stable. I don’t expect this transition to be something very dramatic,” Gopinathan said in a press conference on Friday.

Krithivasan echoed his views, ruled out any radical changes in strategy and promised to work closely with the outgoing CEO during the transition phase to understand the rest of TCS (beyond the BFSI arm) better and get a good grip on all customer needs. He also revealed plans to move to Mumbai from Chennai.

Analysts agreed with the management’s assessment, with most brokerage firms indicating the exit might not be disruptive as a longtime insider was taking over.
"While the appointment of Krithivasan should lead to more continuity, changes to strategy will be keenly awaited if any," Citi wrote in a note.

CLSA said that given the age of senior leadership at TCS, succession planning could become a point of focus, especially for long-term investors.
Gopinathan’s exit comes at a time when growth in the technology sector is projected to moderate as clients curtail spending amid recession fears. Gartner has cut its forecast for worldwide IT spending growth to 2.4 per cent this year, from 5.1 per cent projected earlier.

The collapse of Silicon Valley Bank and a few other U.S. regional banks have also created concerns about a potential slowdown in the all-important BFSI business of IT firms. TCS, which draws more than 30 per cent of its revenue from BFSI clients, is the largest player in this space globally.

Outgoing CEO Gopinathan used the Friday event to allay concerns tied to any slowdown, terming it as part of any normal business cycle. He also tried to clear the air around the timing of his exit, especially since he was reappointed as the CEO of India’s largest software services exporter till 2027.

"When I was reflecting in terms of what would be a good time, I felt that there is no better time than this. And it was important to do this before the start of the new financial year, so that the incoming CEO, in this case, Krithi, has the full runway to play with,” Gopinathan said, without shedding light on his next move.

“I had made a decision that the day my mind is not fully into the job, I will step down. This is not a seat where I think about my future, this is a seat where I have to think about the future of TCS. The moment the mind wanders to my future, I knew it was better to have someone else sit on this seat,” Gopinathan said. “I have no clue what I am going to do.”

Gopinathan, who completed 22 years at TCS including half a dozen as its CEO, said he saw the Krithivasan having a tenure of 5-6 years as the retirement age at the company was 65 years. He also commented on another potential leadership change at TCS.

“As far as NGS goes, … one and half years is quite a lot of time. In the appropriateness of time, I am sure that will also get discussed,” Gopinathan said, referring to Chief Operating Officer N Ganapathy Subramaniam.