Motilal Oswal's research report on Persistent Systems
Persistent Systems announced two strategic developments: (1) the acquisition of Nagarro for an enterprise value of €1.27b, and (2) a new USD650m+ services contract over 6.5 years with an existing US-based technology customer. Nagarro adds ~USD1.1b revenue, taking the combined entity to nearly USD2.9b revenue with ~46,000 employees across 40+ countries, while strengthening Persistent's presence in Europe and broadening its service portfolio. Separately, the large customer deal is entirely incremental (not a renewal), is expected to contribute ~USD125m annually, and begins ramping from 2QFY27. Transaction details: Persistent will acquire 100% of Nagarro through an all-cash offer of €81/share, implying an enterprise value of €1.27b (140% premium to the undisturbed share price and 94% premium to the three-month VWAP). The company has already secured a 21% stake, with Nagarro's management also intending to tender its shares.
Outlook
We continue to value the stock at 34x FY28E EPS and reiterate our BUY rating with a TP of INR6,200.
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Persistent Systems - 2906026 - moti