- Persistent Systems target price raised to Rs 7,210 with a retained Buy rating by Axis Capital
- Persistent increased stake in Nagarro to 83.25%, enabling possible Nagarro delisting
- Nagarro delisting removes overhang, easing synergy realization concerns for Persistent
Persistent Systems Target Price: Axis Capital analysts Ravi Menon, Rohit Thorat and Rushabh Jain have retained their ‘Buy' rating on Persistent Systems and raised the target price to Rs 7,210 from Rs 6,980, citing the potential removal of a key overhang around Nagarro following Persistent's increased stake in the company.
The key trigger, according to the analysts, is Persistent Systems' stake in Nagarro rising to 83.25% following the open offer. This makes Nagarro's delisting possible and, in Axis Capital's view, reduces concerns around delayed synergies and the possibility of Persistent having to make higher payouts to complete the process.
Persistent Systems Target Price Hiked
Axis Capital has raised its target price on Persistent Systems to Rs 7,210 from Rs 6,980, while retaining its ‘Buy' rating. The new target reflects an upside potential of 37%.
The brokerage has kept its valuation multiple unchanged at 32x September 2028 estimated P/E, while factoring in revenue synergies into its FY28 estimates.
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The analysts expect operational integration between Persistent and Nagarro to begin in Q3FY27, with synergy benefits becoming visible by Q1FY28.
Nagarro Delisting Removes Major Overhang For Persistent Systems
According to Axis Capital, the increase in Persistent's Nagarro stake to 83.25% following the open offer removes a major potential overhang for the stock.
Investors had been concerned that Nagarro could remain listed for an extended period, potentially limiting the pace of synergy realisation. There were also concerns that Nagarro's performance could affect Persistent's stock sentiment either way.
The analysts noted that a strong performance by Nagarro could have raised concerns about a higher premium being required for delisting, while weak performance could have been viewed as a sign of slower growth for the combined entity.
With the open offer crossing the threshold required for approval of delisting by Nagarro's management board and supervisory board under German law, Axis Capital believes synergy benefits can begin to be realised even if Persistent does not immediately cross the 90% stake required for a squeeze-out.
Persistent Systems-Nagarro Squeeze-Out Could Enable Full Integration
Axis Capital said the squeeze-out of minority shareholders, which would allow full integration, remains possible.
If Persistent's stake crosses 90% through the extended open-offer window running from September 23 to October 6, a squeeze-out of the remaining minority shareholders would be possible, according to the analysts.
In that scenario, the analysts expect full integration to be likely by Q4FY27.
Even if the 90% threshold is not reached immediately, Axis Capital expects the lack of liquidity in Nagarro shares to encourage further tendering in the coming months at the same EUR 81.0 offer price.
Persistent Systems Can Leverage Nagarro For Revenue Synergies
Axis Capital expects Persistent Systems to leverage Nagarro's capabilities through cross-selling initiatives and changes to its sales process.
The analysts identified SAP-related services and manufacturing vertical expertise as two key Nagarro strengths that Persistent can immediately leverage and cross-sell to its existing client base.
At the same time, Persistent's strengths in cloud and infrastructure services and cybersecurity could be cross-sold to Nagarro's customer base.
Persistent Systems ‘Buy' Rating Retained
Axis Capital has retained its ‘Buy' rating on Persistent Systems while raising its target price to Rs 7,210 from Rs 6,980.
The brokerage has incorporated the expected revenue synergy into its FY28 estimates, while keeping the valuation multiple unchanged at 32x September 2028 estimated P/E.
The analysts said the revised target price reflects the potential benefits from Nagarro's delisting and subsequent integration, with synergy benefits expected to become visible from Q1FY28.
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