Can Persistent digest Nagarro?

Shares of Persistent Systems Ltd dropped as much as 11% to hit a 52-week low of 4,265 on Monday after it decided to acquire Munich-based Nagarro SE for an enterprise value of ₹1.27 billion.

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Persistent has bought a 21% stake in the digital engineering company and intends to acquire a 100% stake through an open offer.

The all-cash transaction includes net debt of about ₹268 million, to be funded through a bridge loan. The deal is expected to be earnings per share-accretive from the first year, excluding transaction costs.

The deal aligns with Persistent's long-stated goals of reducing its 81% revenue exposure to the US market, reaching $5 billion revenue by FY31, and entering newer verticals such as manufacturing, retail and public services. Persistent now operates in banking, financial services and insurance (BFSI), high-tech and healthcare.

Despite cross-selling opportunities, the trade-off is hard to ignore: higher integration and execution risk given the large deal size, Nagarro's low margin profile and reduced financial flexibility.