Tech Mahindra's shares gained the most in nearly seven years on March 13, after the IT giant announced former Infosys president Mohit Joshi as its MD and CEO designate to take over from CP Gurnani, who retires on December 19, 2023.

Share Market Live

NSE

Infosys, meanwhile, informed the exchanges that Joshi has resigned from the company and will be on leave effective from March 11, 2023. His last date with the company would be June 9, 2023.

The developments come as relief for Tech Mahindra as investors have for a long time been focused on management transition as a key event. However, analysts say this departure is likely to be a negative for Infosys in the near term.

Also Read: Tech Mahindra to invest Rs 700 crore in products and platforms division in 2 years

JPMorgan believes Tech Mahindra’s choice of CEO is great but a turnaround is not easy and will take time while Citi expects a favourable stock reaction in the near term due to the appointment but the real test of performance will start next calendar year once Joshi assumes the CEO role. The tech company has clarified Joshi will join Tech Mahindra well before December 19 to allow for sufficient transition time.

Nomura does not expect any immediate strategy change announcement on the joining of Joshi, who was the head of global financial services and healthcare and software business for 22 years at Infosys.

JPMorgan has said that Tech Mahindra faces structural challenges in matching leading peers in organic growth and margin. The challenges include high telecom exposure and emerging markets exposure coming with lower pricing and margin.

According to Citi, the industry view is cautious in a tough macro though the firm has room to improve margin in the medium-term. The brokerage has positioned it better than peers.

Also Read: Tech Mahindra reorganising platform business under one brand

Citi added that the market will again focus on the pace of turnaround, which can potentially take time. JPMorgan, believes the stock can potentially re-rate marginally from here on and that a structural re-rating can happen only over the medium term.

CLSA, on the other hand, has pointed out that Infosys will need to find a quick replacement to ensure minimal business disruptions. It noted that Joshi’s departure after the recent shift of the former president and COO Ravi Kumar creates an optical cap in the succession chain.

JPMorgan too highlighted the second loss of a senior leader to a Tier-1 rival over the last six months, saying these departures highlight the depth of Infosys’ leadership.

The departures showcase inability to provide adequate career mobility to senior talent, the brokerage said, adding that the current CEO Salil Parekh’s tenure extension may have precipitated these departures.

Catch latest stock market updates on CNBCTV18.com’s blog