Shares of India’s Persistent Systems dropped as much as 10.6% to a near 15-month low on Monday after the IT services firm offered to buy Germany’s Nagarro for 1 billion euros ($1.14 billion), with analysts flagging excessive valuation, integration and margin-dilution risks.
The stock was trading at 4,357.50 rupees, as of 11:26 am IST, hitting its lowest since April 2025 and marking its steepest intraday fall since October 2018.
Persistent offered over the weekend to buy the AI-led digital engineering firm for 81 euros per share, a 100% premium to Nagarro’s Friday close. Nagarro’s board plans to recommend the offer to shareholders.
If completed, the deal would be Persistent‘s largest acquisition, dwarfing its $90.5 million purchase of consulting firm Data Glove in 2022.
The merger would expand Persistent‘s European presence and add segments such as automotive and industrials. However, valuations appear “excessive” given Nagarro’s relatively low growth profile, UBS analysts said.
INTEGRATION CHALLENGES
Analysts also flagged risks from integrating a large acquisition and funding it through a bridge facility.
Persistent‘s stock faces a near-term overhang from execution risks, potential earnings-per-share dilution and higher balance-sheet leverage, Emkay analysts said.
Persistent said the deal would create a globally diversified AI-led digital engineering firm, with a scaled presence in North America and Europe.
Nagarro’s organic revenue fell 1.1% in the first quarter, with analysts saying the start to 2026 was slow and reflected continued softness in demand.
The deal will be funded through a committed 1.4 billion euro bridge facility, including potential refinancing of Nagarro’s debt, Dolat Capital analysts said.
“Funding the deal via a 1.4 billion euro bridge facility elevates balance sheet leverage, and consolidating Nagarro’s lower-margin profile poses immediate margin dilution,” they said.
($1 = 0.8782 euros)
Reuters
