Persistent Systems makes its biggest bet yet with $1.3 billion Nagarro deal

Persistent Systems Ltd on Saturday announced its biggest acquisition since listing in 2010, aiming to leapfrog Mphasis Ltd and Coforge Ltd to become the country's seventh-largest IT services company.

Persistent Systems will pay €81 per share to acquire Nagarro SE for roughly $1.3 billion. The deal is expected to close by March 2027, after which the combined entity will operate as the Persistent-Nagarro Group.

Nagarro is a Munich-based IT services firm that ended last fiscal year with $999 million in revenue and about 18,500 employees. Almost half of its revenue comes from European clients, a key benefit of the deal, according to Persistent.

“This combination strengthens our position in Europe, expands our scale in North America, and enhances our ability to help clients accelerate their AI and digital transformation journeys,” said chief executive Sandeep Kalra in the company’s release to the stock exchanges.

After the acquisition, it expects one-fifth of its business to come from Europe, up from the current one-tenth.

Coforge, Mphasis, and Persistent Systems ended the last fiscal year with a revenue of $1.87 billion, $1.8 billion, and $1.65 billion, up 29%, 7%, and 17% year-on-year, respectively. While Indian IT services firms follow the April-March financial calendar, Nagarro follows the January-December financial calendar.

Funding challenge

India's mid-sized IT services firms earning between $1-2 billion in revenue have made the two largest acquisitions in Indian IT in the last 12 months.

On 26 December, Noida-based Coforge announced the acquisition of Encora, a US-based data analytics firm. At $2.39 billion, it is the largest acquisition in Indian IT. Together, the company aimed to get about $2.5 billion in revenue.

For now, Persistent Systems is expected to pip Coforge’s big bet with its own acquisition. The company expects to do this in two steps.

The Pune-based company has agreed to buy 21% of the shares from Carl Georg Durschmidt, a member of the supervisory board and the largest shareholder of Nagarro. This itself amounts to about $273 million. Persistent needs to buy at least 50% of the shares for the acquisition to be completed.

It is making a public offer to all other Nagarro shareholders to buy their shares at €81 per share, with the goal of acquiring the entire company and delisting it from the German stock exchange.

Manas Chandra Human, the co-founder of Nagarro, owns 6.2%, while other company executives own another 6%, giving the management a total ownership of about 12%. Persistent’s friendly offer of €81 per share will need support from some of the large money managers and public investors who own the remaining 67% of the shares.

For now, Nagarro said in a press release that the management supports the offer. Still, Persistent needs approval from the German market regulator. It is expected to wrap up the transactions around late 2026 or early 2027.

Persistent Systems isn't paying the acquisition amount out of its own pocket. In December 2025, the company set up a wholly owned German subsidiary, Galaxy Germany Holding SE, which would borrow up to €1.4 billion ($1.6 billion) from Barclays. This is more than the $1.3 billion that would come from its share repurchase.

The company would also have to repay the entire loan amount within 18 months, according to the loan terms. Simply put, Persistent Systems would need an additional source of funding to repay its dues to Barclays within 18 months.

For now, the company has not disclosed its source of funding for the loan repayment or the reasons behind taking a bigger loan than the total amount required to pay off Nagarro’s shareholders.

Mint's emails to Nagarro and Persistent Systems remained unanswered.

Inorganic growth

“The differential amount may be used to pay off some of Nagarro’s debt, implying that the company will take on some of its debts. Nagarro’s net debt is almost the same $300 million differential that is appearing now,” said Sushovon Nayak, lead IT analyst at Anand Rathi Institutional Equities.

“For a mid-sized IT outsourcer, large acquisitions are the only way to build scale. Persistent also gets more exposure to the auto sector in Europe, but the question is around how they will repay the Barclays debt in 18 months,” added Nayak.

These acquisitions come at a time when the country’s largest IT services companies are doubling down on new growth avenues as the rise of automation tools and geopolitical tensions in West Asia threaten to eat into their revenue.

India’s five largest firms have already spent nearly $5 billion on acquisitions over the last 18 months.