Persistent Systems shares fell as much as 9.13% in intraday trade on Monday, to its lowest level since April 2025, after the company announced a €1.1 billion (around Rs 11,820 crore) acquisition of Frankfurt-listed IT services firm Nagarro, marking its biggest-ever overseas acquisition.
The acquisition, structured as a voluntary public takeover offer at €81 per share, values Nagarro at about 1.3 times enterprise value-to-sales. Persistent has already secured a 21% stake through a binding agreement with Nagarro's largest shareholder and expects to complete the transaction by Q4CY26 or Q1CY27.
Nagarro's revenue has grown at around 5% over the past three years, significantly slower than Persistent's 15-18% dollar revenue growth. Nagarro also operates with lower EBIT margins of 11-13%, compared with Persistent's roughly 16%.
In addition, Nagarro's shares had fallen nearly 75-80% from their peak before the acquisition announcement due to slowing growth, weak cash conversion and governance concerns.
Brokerage Views
Nuvama Institutional Equities downgraded Persistent Systems to 'Hold' from 'Buy' and slashed its target price to Rs 4,800 from Rs 6,100. While it said the acquisition makes strategic sense by expanding Persistent's presence in Europe, the Middle East and manufacturing, retail and public services verticals, it cautioned that Nagarro's slower growth profile and integration risks could weigh on earnings. The brokerage also believes Persistent's premium valuation of around 33 times FY27 earnings may be difficult to sustain.
Emkay Global retained its 'Add' rating with a target price of Rs 5,200, describing the transaction as a "high-stakes acquisition" where execution will determine value creation. It expects near-term earnings dilution and believes the stock could remain under pressure until investors gain confidence in the integration.
Motilal Oswal was the most optimistic, reiterating its 'Buy' rating with a target price of Rs 6,200. The brokerage said the acquisition addresses Persistent's long-standing objective of building scale in Europe and creates cross-selling opportunities with minimal customer overlap. However, it also flagged risks around integrating Nagarro's enterprise resource planning (ERP) business, a more mature and competitive segment than Persistent's core business.
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Once completed, the acquisition will nearly double Persistent's revenue run-rate to about $2.9 billion from $1.6 billion, increase Europe's contribution to revenue from 9% to 22%, and expand its workforce to more than 46,000 employees across over 40 countries. The company also expects the deal to be earnings accretive from the first year and accelerate its path toward its long-term $5 billion revenue ambition.
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