29 - 06 - 2026

Investor scepticism greets Persistent Systems’ €1.1 billion acquisition

Shares of Pune-based Persistent Systems Limited fell 10.22 per cent to ₹4,346.50 on Monday (June 29, 2026) as investors reacted with scepticism to the company’s agreement to acquire Germany’s Nagarro SE in a €1.1 billion.

On Saturday, Persistent Systems said it entered into an agreement to acquire digital engineering firm Nagarro in a €1.1 billion all-cash deal, a move in line with Indian firms looking at acquisitions to build scale in Artificial Intelligence (AI)-led services.

According to the agreement, the Indian firm has secured 21 per cent stake in Nagarro, while its founding shareholder will launch a public takeover offer for all remaining Nagarro shares, it said in a stock exchange notification on Saturday.

On Monday, Persistent Systems stock crashed 10%, making it the top midcap loser during the day as brokerages opined that Nagarro acquisition was expensive.

Motilal Oswal

“We view this acquisition as addressing Persistent’s long-standing objective of building scale in Europe, broadening its vertical mix, and creating cross-sell opportunities with limited customer overlap. The acquisition also appears priced at 9.1x EV/EBITDA, which we believe is a reasonable valuation for a business of Nagarro’s scale,” a Motilal Oswal report said.

“However, it remains to be seen how much value Persistent can extract from the acquisition through integration and cross-selling. We are relatively more cautious on the addition of Enterprise Resource Planning (ERP), a more mature and competitive service line than Persistent’s core digital engineering business,” it said.

At present, currently contributes only 8-9 per cent of revenue for Persistent, whereas Nagarro has a “well-established” presence across Germany, France, Italy, Spain and Israel, among others. Following the acquisition, the combined revenue mix is expected to shift to about 62% North America, 22% Europe, and 16% Rest of World (refer to Exhibit 1).

Persistent Systems’ acquisition of Nagarro to diversify its geographic presence and industry exposure. The transaction increases the contribution of European revenue to 22 per cent of the combined entity from the current 8 to 9 per cent for Persistent Systems.

The acquisition broadens the industry mix of Persistent Systems by adding exposure to Industrials, Consumer, and Public Sector verticals. It also provides access to government and regulated-sector opportunities where Persistent Systems previously had limited presence. Furthermore, Nagarro adds capabilities in ERP, particularly in SAP, consulting, and customer experience, alongside manufacturing-led engineering.

ICICI Securities

“Nagarro is seeing mid-single-digit organic revenue growth, partly attributable to management’s focus shift to taking the company private in CY24–25. Slowdown in revenue growth from CY23 was led by a decline in the Horizontal Tech vertical for Nagarro, and muted performance in most other verticals, except industrials, which saw a mid-teens CAGR,” ICICI Securities said in a report.

“Turning around Nagarro’s revenue growth profile in a challenging demand environment with multiple headwinds (AI deflation, shift of spends to AI native players and GCCs, weak macro) remains a monitorable. Persistent Systems plans to bring in the same execution rigour to Nagarro as it has in the organic business,” it added.

Nagarro has also done 14 acquisitions over last five years with goodwill, total assets of 27 per cent as of calendar year 2025.

Citi

According to Citi, which maintained a ‘Sell’ rating on Persistent, the transaction is expensive given Nagarro’s historical growth trajectory, current global valuations and comparable deals.

It expects the combined entity to deliver only low double-digit year-on-year growth initially, although management has guided for the acquisition to be cash EPS accretive, excluding one-off costs, in the first year itself.

CLSA

CLSA also termed the acquisition as expensive, adding Persistent is paying a premium of 140 per cent. Nagarro’s growth has trailed Persistent’s organic growth, it said, adding the acquisition is expected to deliver about 6 percent EPS accretion.

Earlier, on May 20, 2026, IT services and solutions provider Hexaware Technologies said it entered into an agreement to acquire Consulting Professionals Services Holdings Limited together with its wholly owned subsidiary Consulting Professionals Services.

Munich-headquartered Nagarro employs 18,500 personnel across 40 countries, with deep roots in industrial, consumer, Telecom Media and Technology (TMT) and Banking, Financial Services and Insurance (BFSI) verticals and a total revenue of € 1 billion (calendar year 2025).

“Persistent and Nagarro are a perfect strategic fit, combining Persistent’s AI-led engineering leadership, North American scale and partnership depth with Nagarro’s European business, complementary verticals, AI expertise, and ERP and CX delivery, to create a $2.9 billion AI-led engineering powerhouse…,” the company said in a BSE notification.

Following the completion of the deal, Persistent intends to pursue delisting of Nagarro shares from Frankfurt Stock Exchange.

“AI is reshaping our industry at an unprecedented pace. Success will belong to companies that combine deep technical capability with global reach, while continuing to attract, develop and inspire exceptional people. Together, Persistent and Nagarro will be better positioned to help our clients navigate this new era, create greater opportunities for our teams, and build an organisation that will endure for many years to come,” Anand Deshpande, founder, chairman and managing director at Persistent Systems said.

https://www.prnewswire.com/news-releases/hexaware-acquires-consulting-professionals-services-to-strengthen-ai-and-cloud-transformation-capabilities-302778003.html