ICRA has placed Persistent Systems' rating on watch with negative implications due to the debt-funded acquisition of Nagarro SE. The deal will significantly increase leverage, posing refinancing risks.
Persistent Systems Rating Watch Negative Amid Nagarro SE Acquisition
ICRA has placed Persistent Systems Ltd's [ICRA]AA+ rating on 'Rating Watch with Negative Implications' following the company's announcement to acquire Nagarro SE.
Reader Takeaway: Increased leverage and refinancing risk as Persistent Systems acquires Nagarro SE.
What just happened
Credit rating agency ICRA has placed Persistent Systems Ltd's current rating of [ICRA]AA+ on 'Rating Watch with Negative Implications'. This action is primarily due to the debt-funded acquisition of Germany-headquartered Nagarro SE.
Why this matters
The rating watch signals caution from ICRA regarding the potential impact of the acquisition on Persistent Systems' financial health. The significant increase in debt levels and the associated refinancing risks are key concerns for the company's credit stability.
The backstory
On June 27, 2026, Persistent Systems announced a voluntary public takeover offer for Nagarro SE. The deal involves acquiring a 21% stake from Lantano Beteiligungen GmbH and an open offer for a controlling stake, targeting 100% ownership. The acquisition implies an Enterprise Value of approximately EUR 1.27 billion, with EV/Revenue and EV/OPBDIT multiples of about 1.27x and 9.1x, respectively. The transaction is expected to be completed by Q4 CY2026 or Q1 CY2027.
What changes now
The acquisition is entirely debt-funded through a EUR 1.4 billion bridge financing facility. ICRA estimates that Persistent Systems' consolidated leverage will increase to 2.0-4.5 times in the medium term. Nagarro's lower operating margin (12.1% in CY2025 compared to Persistent's 19.0% in FY2026) is expected to moderate the blended operating margin of the combined entity. The combined entity is projected to have annual revenues of around USD 2.9 billion and over 46,000 employees.
Risks to watch
Increased leverage is a major concern, with debt levels expected to remain above ICRA's negative trigger threshold of 1.3 times until FY2029. The short-term nature of the bridge financing also exposes the company to refinancing risks. Successfully integrating Nagarro SE, managing a significantly larger workforce, and executing cross-border integration are critical watch points.
Peer comparison
While specific peer financial data for this transaction context is not provided in the filing, the acquisition aims to significantly scale Persistent Systems. The acquisition of Nagarro SE, with its lower operating margins, is expected to create a larger entity with a projected USD 2.9 billion in revenue and over 46,000 employees.
Context metrics
- Leverage: Expected to rise to 2.0-4.5 times in the medium term.
- Bridge Financing: EUR 1.4 billion.
- Nagarro's Operating Margin: 12.1% (CY2025).
- Persistent's FY2026 Operating Margin: 19.0%.
- Combined Revenue: Approximately USD 2.9 billion.
- Combined Employees: Over 46,000.
What to track next
Investors should closely monitor Persistent Systems' deleveraging plans, the eventual stake acquired in Nagarro SE, and the terms of refinancing the bridge facility. Future disclosures regarding debt restructuring and the margin performance post-integration will be crucial.