Tech Mahindra soars on appointment of new CEO

Mumbai: Shares of Tech Mahindra jumped 6.8% in a weak market on Monday after the company announced the appointment of former Infosys president Mohit Joshi as its new managing director and chief executive. Most domestic and foreign brokerages, however, retained their neutral rating on the stock following the announcement.

Investors are hoping the appointment of Joshi, who will take charge of the IT services company in December this year after CP Gurnani's retirement, would turnaround its fortunes. Tech Mahindra shares jumped nearly 10% on Monday - clocking their biggest single-day gain in three years - before closing the day at ₹1,134. It was the top performer among the top 500 stocks. The Sensex and Nifty dropped 1.5%, while the NSE IT index declined 0.9%.

JPMorgan, which has a target of ₹1,100 per share, lauded Joshi's appointment. "Great CEO choice, but a turnaround is not easy and will take time. Tech Mahindra faces structural challenges in matching leading peers in organic growth and margin," said analysts at JPMorgan.

More than one crore shares exchanged hands on BSE and NSE, over three times the average daily volume on both the exchanges for the last one month.

Citigroup said the real test of performance will begin next calendar year after Joshi assumes office.

"In the meantime, the market will again focus on the pace of turnaround, which can potentially take time." The US brokerage firm has a target of Rs 1,120 per share.

Nomura said Joshi's focus at Tech Mahindra could be to increase large deals, improve focus on the banking and financial verticles, while drive up margins.