CLSA retained its ‘High Conviction Outperform’ rating on the stock with a target price of ₹6,520, saying the acquisition is strategically compelling and attractively valued despite the steep premium being offered.
Citi, however, maintained its ‘Sell’ rating with a target price of ₹4,090, citing valuation concerns and near-term integration risks.
CLSA said Persistent is acquiring Nagarro at an enterprise value of about $1.4 billion, implying an EV/sales multiple of 1.2x, EV/EBITDA of 9.6x and a P/E multiple of around 13x.
While the offer represents a nearly 140% premium to Nagarro’s undisturbed closing price on June 25, the brokerage believes the valuation remains attractive given the sharp derating in global IT services stocks. It estimates the transaction could be around 6% earnings accretive and help Persistent move closer to its FY31 revenue target of $5 billion.
Citi acknowledged that the acquisition would strengthen Persistent’s presence in Europe and enhance the scale of its key industry verticals. However, it believes the transaction appears expensive considering Nagarro’s historical growth trajectory, current sector valuations and comparable deals.
The brokerage also said that Persistent already trades at a premium valuation of around 33x FY27 estimated earnings, adding that investors will closely monitor execution and integration risks following the acquisition.
Persistent has announced plans to acquire Munich-headquartered Nagarro through an all-cash voluntary public takeover offer, marking one of the largest cross-border acquisitions by an Indian IT services company.
As part of the transaction, Persistent has already secured the backing of Nagarro’s largest shareholder, Lantano, which owns about 21% of the company.
The company will offer €81 per share to acquire the remaining outstanding shares of Nagarro. The offer represents a premium of about 140% over Nagarro’s unaffected closing price on June 25 and nearly 94% above its three-month volume-weighted average price.
Nagarro shares surged 20% following the announcement on Friday, although the stock remains down nearly 47% so far in 2026.
Once completed, the combined entity is expected to have an annual revenue run-rate of approximately $2.9 billion, more than 46,000 employees and operations across over 40 countries.
The acquisition is expected to significantly expand Persistent’s European footprint, with the region’s contribution to revenue rising from 9% to 22%. North America will continue to account for around 62% of the combined company’s revenue.
Persistent said the transaction will expand its total addressable market to more than $1.4 trillion while strengthening its presence across banking, financial services and insurance (BFSI), healthcare and life sciences, technology, media and telecom (TMT), industrials and consumer.
The company expects the acquisition to be cash EPS accretive in the first year after the transaction closes.
Persistent will fund the acquisition entirely through cash, backed by committed financing from Barclays. The company expects leverage to remain within conservative levels after the deal and decline meaningfully over the following two years.
Persistent also said it does not intend to enter into a domination and profit transfer agreement with Nagarro for at least two years after closing, allowing the German company to continue operating independently. It plans to delist Nagarro from the Frankfurt Stock Exchange’s Prime Standard after the acquisition is completed.
The transaction is expected to close in the fourth quarter of calendar year 2026 or the first quarter of calendar year 2027, subject to regulatory and shareholder approvals.
For calendar year 2025, Nagarro reported revenue of €999 million, up 6.1% in constant currency terms, while gross margin expanded by 180 basis points to 32.2%. Profit declined due to foreign exchange movements and labour-related costs. In the first quarter of FY26, the company posted constant currency revenue growth of 6.5%.
Persistent Systems shares ended Thursday’s session 1.8% lower at ₹4,846.50. The stock has declined 23% so far this year.
