CLSA maintained its ‘High Conviction Outperform’ rating on the stock, setting a target price of ₹6,520. The brokerage stated that the acquisition is strategically advantageous and reasonably priced, despite the high premium being proposed.
Conversely, Citi upheld its ‘Sell’ rating with a target price of ₹4,090, pointing to valuation apprehensions and short-term integration risks.
According to CLSA, Persistent is acquiring Nagarro for an enterprise value of approximately $1.4 billion, which translates to an EV/sales multiple of 1.2x, EV/EBITDA of 9.6x, and a P/E multiple around 13x.
Although the offer reflects a nearly 140% premium over Nagarro’s undisturbed closing price on June 25, the brokerage believes the valuation remains appealing given the significant derating in global IT services stocks. It estimates the deal could be about 6% earnings accretive and facilitate Persistent in reaching its FY31 revenue goal of $5 billion.
Citi recognized that the acquisition would enhance Persistent’s presence in Europe and improve its key industry verticals’ scale. However, it views the transaction as pricey when considering Nagarro’s past growth patterns, current sector valuations, and comparable transactions.
The brokerage added that Persistent already trades at a premium valuation of roughly 33x FY27 estimated earnings, noting that investors will closely watch the execution and integration risks post-acquisition.
Persistent has revealed plans to acquire Munich-based Nagarro via an all-cash voluntary public takeover offer, marking one of the most significant cross-border acquisitions by an Indian IT services firm.
For this transaction, Persistent has secured the support of Nagarro’s largest shareholder, Lantano, which holds about 21% of the company.
The company will offer €81 per share to secure the remaining outstanding shares of Nagarro. This offer signifies a premium of around 140% over Nagarro’s unaffected closing price on June 25, and nearly 94% above its three-month volume-weighted average price.
Following the announcement on Friday, Nagarro shares soared by 20%, although the stock remains down nearly 47% for the year 2026.
Once finalized, the combined entity is projected to achieve an annual revenue run-rate of about $2.9 billion, employing more than 46,000 individuals and operating in over 40 countries.
The acquisition is expected to greatly enhance Persistent’s European footprint, with the region’s revenue contribution rising from 9% to 22%. North America will continue to represent approximately 62% of the combined company’s revenue.
Persistent indicated that the transaction will broaden its total addressable market to over $1.4 trillion while reinforcing its position in banking, financial services and insurance (BFSI), healthcare and life sciences, technology, media and telecom (TMT), industrials, and consumer sectors.
The company expects the acquisition to be cash EPS accretive in the first year post-transaction.
Persistent plans to fully finance the acquisition with cash, supported by committed financing from Barclays. It anticipates that leverage will remain within conservative limits after the transaction and decrease significantly over the next two years.
Additionally, Persistent stated it does not intend to pursue a domination and profit transfer agreement with Nagarro for at least two years after closing, allowing the German company to operate independently. It aims to delist Nagarro from the Frankfurt Stock Exchange’s Prime Standard after the deal is finalized.
The transaction is expected to close in the fourth quarter of calendar year 2026 or the first quarter of calendar year 2027, pending regulatory and shareholder approvals.
For calendar year 2025, Nagarro reported revenue of €999 million, a 6.1% increase in constant currency terms, while gross margin improved by 180 basis points to 32.2%. Profits declined due to foreign exchange fluctuations and labor-related expenses. In Q1 of FY26, the company achieved constant currency revenue growth of 6.5%.
Persistent Systems shares concluded Thursday’s session at ₹4,846.50, down 1.8%. The stock has dropped 23% year-to-date.
