How TCS shares fared under CEO Rajesh Gopinathan: Stock up 164%, total dividend at Rs 352

Rajesh Gopinathan is exiting Tata Consultancy Services (TCS) unexpectedly after heading it for six years. During his reign, TCS shares climbed 164 per cent; the cash-rich company announced accumulated dividends to the tune of Rs 352.50 per share during this period. It announced a bonus issue in 2018 (in the 1:1 ratio) also and came out with share buybacks in 2018 (Rs 16,000 crore), 2020 (Rs 16,000 crore) and 2022 (Rs 18,000 crore).

In 2017, the TCS board approved Rs 16,000 crore in share buyback on February 20, but Gopinathan took over as MD & CEO of the company on February 21, 2017. Gopinathan will continue to be at TCS till September 15.

Under him, TCS delivered a strong financial performance, delivering revenue compounded annual growth rate (CAGR) of 13 per cent and earnings CAGR of 11 per cent over FY18–23, despite Covid impact and industry slowdown.

"To be sure, this change in CEO comes as a surprise to everyone. We, however, view this is as a continuation of a trend at TCS, wherein baton shall be passed from one veteran to another," said Nuvama Institutional Equities.

Gopinathan has been with Tata Group since the beginning of his career, when he joined Tata Strategic Management Group in 1996. He moved to TCS in 2001. Since then, Gopinathan has held various positions, including CFO in 2013–17, before being appointed as CEO in February 2017, after former CEO N Chandrasekaran, was promoted as Chairmen of Tata Group.

Analysts noted that Gopinathan continued the legacy of last CEO, delivering industry-leading growth among large-cap peers, adding over $10 billion in incremental revenue during his tenure.

"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. Maintain ‘BUY/SO’ with a target of Rs 4,100," Nuvama said.

From a business perspective, said Nirmal Bang, Institutional Equities, TCS will weather this exit.

"We have known of Krithivasan’s existence for a few years despite his low profile but were not aware that he was being groomed to be the successor," said Nirmal Bang, Institutional Equities.

The brokerage noted that TCS continues to follow the pattern of choosing internal candidates for the CEO’s role, adding that HCL Technologies has been the only other Tier-1 company that has followed the internal candidate model.

"Krithivasan comes from the business side. He has held various leadership roles in delivery, customer relationship management, large program management and sales. Rajesh had been the CFO of TCS for four years before he was elevated to the CEO’s role. TCS is a well-oiled machine and we do not see too many challenges before Krithivasan, except that of demand," Nirmal Bang said.

Motilal Oswal Securities noted that unlike previous transitions, where incoming CEOs had a long runway in front of them till retirement at 65 years -- S Ramadorai (CEO at 51 years), N Chandrasekaran (CEO at 45 years) and Gopinathan (CEO at 46 years), Krithi is 58 years old and will be CEO for the next 6-7 years only.

"While this limits the flexibility for him, we expect TCS to continue to benefit from the recent changes in its operating model (in 2022) as well as significant recent intake of freshers in the system," it said.

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