Over the past decade, several mid-sized information technology companies posted significant growth and some even outperformed the industry, after a change in their top management.

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There have been multiple instances of sudden changes of CEOs in the IT services sector recently. An analysis of 13 such leadership changes by Jefferies over the past decade, showed that among the mid-sized IT firms, the change of leadership led to revenue growth outperformance in four out of six occasions.

While in case of large IT firms, a CEO change led to outperformance on revenue growth in three out of seven occasions. Hence, mid-sized IT firms have a higher likelihood of performing its best after a leadership change compared to larger firms.

Of the 13 CEO changes, there were six potential turnaround situations. Of these, a full turnaround has taken place in two cases -- both in mid-sized IT firms. LTIMindtree, Birlasoft, Zensar are some of the recent mid-sized IT firms with leadership changes in last one year.

A turnaround in IT firm is when it has lagged the industry on both revenue and PAT growth prior to the CEO change. Turnarounds in IT firms are difficult to achieve, especially in the larger ones. Jefferies says expecting TCS and Tech Mahindra to outperform on revenue and PAT growth due to leadership change may be optimistic.

Jefferies says a strategy built around improving a particular parameter at the cost of other parameters is usually unrewarded by the market over the longer run.

Nifty IT was among the best performing indices in 2020, but its returns have moderated in 2021 and 2022. In 2023, year to date the index has managed to reward just 3 percent to its investors, in line with Nifty 50.

(Edited by : CH Unnikrishnan)