Persistent Systems to Raise Rs 6,000 Crore Through NCDs for Nagarro Acquisition
Persistent Systems is making big moves to fund its largest acquisition yet. The Pune-based IT services company plans to raise more than Rs 6,000 crore through non-convertible debentures (NCDs). The money will help pay for its purchase of Nagarro SE, a German digital engineering firm.
This is a major deal for Persistent. It shows the company wants to grow quickly in Europe and compete with larger IT players. The funding plan also tells us a lot about how big acquisitions are financed in the tech world.
What Are NCDs and Why Use Them?
Non-convertible debentures are debt instruments. Companies issue them to raise money from investors. In return, investors get regular interest payments. Unlike convertible debentures, NCDs cannot be turned into company shares later. They are simply loans that the company must repay.
Persistent’s NCDs will have maturities ranging from one to five years. The average maturity will be around three years. This gives the company flexibility. It can spread out its repayment schedule instead of facing one large payment at once.
Using debt makes sense here. The company already raised equity money through a qualified institutional placement (QIP) earlier this week. That QIP brought in Rs 4,264 crore. By mixing equity and debt, Persistent keeps its funding costs balanced. It also avoids diluting existing shareholders too much.
The Nagarro Deal at a Glance
The total value of the Nagarro acquisition is around $1.25 billion. That is a large sum for Persistent, which is smaller than India’s top-tier IT firms like TCS or Infosys. The deal will significantly expand Persistent’s presence in Europe and add new clients.
Persistent has already secured 94% of Nagarro shares after receiving shareholder offers this month. That is a strong result. In most takeover offers, getting above 90% is considered a big success. It means most Nagarro shareholders accepted Persistent’s offer.
Once the acquisition closes, Persistent will likely move to squeeze out the remaining minority shareholders. Many countries allow this once a buyer crosses a certain ownership threshold.
Why This Matters for Investors
Investors should watch a few things here. First, the debt load. Raising over Rs 6,000 crore through NCDs means Persistent will carry more debt on its books. The company will need steady cash flows to pay interest and repay the principal.
Second, integration risk. Big acquisitions often come with challenges. Merging two companies with different cultures, systems and clients takes time. If integration goes smoothly, Persistent could gain a strong foothold in Europe. If not, the deal could weigh on earnings.
Third, the market reaction. The QIP was completed successfully, which suggests institutional investors have confidence in the company’s plan. The NCD issuance will be watched closely too. If bond investors accept the terms easily, it signals healthy demand for Persistent’s debt.
What Comes Next
Persistent still needs to arrange additional debt financing beyond the NCDs. The company has not shared every detail of the final funding mix yet. More announcements are likely as the deal moves toward closing.
For now, the picture is clear. Persistent is using a mix of fresh equity and new debt to buy Nagarro. The QIP is done. The NCDs are next. If everything goes to plan, the company will soon own one of Europe’s well-known digital engineering firms. That could reshape its business for years to come.
