TCS looked at four candidates, unanimous on K Krithivasan for top job

They denied speculation about any differences being behind Rajesh Gopinathan’s shock resignation, underscoring his strong rapport with Tata Sons Chairman N Chandrasekharan.

“The board was very pleased with the performance of TCS under Gopinathan–the company had the highest revenue growth, profits, margins and there was no difference of opinion on any issue,” said one of the persons.

Gopinathan’s resignation came as a surprise, given that he was just over a year into his second five-year term as MD and CEO. This raised concerns about continuity and strategic direction of the software major amid global macroeconomic challenges.

Also read | All you need to know about the incoming TCS CEO K Krithivasan

The stock opened 0.4% lower on Friday, fell further to an intraday low of Rs 3,157 (down 1.3%) before closing at Rs 3,178, a drop of 0.2% on the BSE Friday. The Sensex ended 0.6% higher.

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“The company is in good hands, there is nothing ad hoc about the process, the clients, employees, the board, both Gopinathan and Krithi–are all happy,” said one of the people, who called the departing CEO a “fantastic” leader. TCS has had a succession plan in place for close to two years and Krithivasan was the “unanimous choice” of the board to succeed Gopinathan. The company has a well laid out succession plan with a pipeline of internal candidates to fill in for any CXO level exit.

Also read | Softspoken, non-flashy type: meet TCS’ new boss K Krithivasan

Subramaniam was not appointed CEO because he is retiring next year in May, said another person. Another said TCS has a “great leadership bench” and almost all business vertical heads are considered worthy of consideration for the top job given that they are top performers and have been with the company for a few decades at least.

The persons cited above said Gopinathan quit as he wants to pursue other interests, echoing the statement issued on Thursday. On being informed of Gopinathan’s resignation, the board met on Thursday and decided on Krithivasan as he’s the head of the largest vertical within the company and is an old TCS hand.

Also read | No dramatic transition; talent pool deep in TCS: incoming CEO K Krithivasan

His age, 59, was not a concern for the board, since he still has another six years before his retirement and the CEO term is for five years. The parting with Gopinathan was “amicable” and he’s being generous by offering to stay on for six months for the transition, said one of the persons cited.

Another person suggested that Gopinathan may continue to serve on the board, although this is something that the directors will take the final call on, the person said.

“Rajesh wants to do something different while he is still young and has often brought it up in private conversations,” said one of the persons.

Gopinathan, 52, has been at TCS for 22 years and was CEO for six years. Krithivasan, who has been at TCS for 33 years, is seen as a strong successor, experts said. Gopinathan’s last day at the company will be September 15.

Also read | Testing time for new CEO designate: experts

“Rajesh Gopinathan was reappointed as CEO last year and therefore his resignation is a surprise and likely to be perceived negatively. However, the resignation is likely for personal reasons and the internal promotion of a TCS veteran along with a six-month overlap between the two should help ease the transition,” brokerage Centrum said in a note. “Krithivasan’s experience in BFSI should further help grow the segment which is 32.1% of TCS’s revenues.”

During Gopinathan’s six-year stint, revenue rose by $10 billion to $25.8 billion and market capitalisation doubled to $140 billion.

In fact, it was the TCS bull run in 2018 that helped the Tata Group reach the Rs 10 trillion market capitalisation milestone before Reliance Industries. This further prompted the group to explore a broader digital strategy across its businesses to replicate the success of TCS. Krithivasan takes over as global macroeconomic challenges have slowed IT spending. TCS is however resilient and well placed to handle the situation, said the persons cited above.