Persistent to squeeze out existing Nagarro shareholders en route to become seventh-largest

Persistent Systems is on track to become the seventh-largest tech services firm in the country after lifting its stake in the German software engineering firm to 94%, a level that can enable a buyout of existing Nagarro shareholders into a merged entity, under German regulations.

The move effectively removes the biggest uncertainty around Persistent's $1.3 billion acquisition, announced in June, and sets the stage for integrating Nagarro into its operations.

Beyond adding nearly $1 billion in annual revenue, the deal significantly expands Persistent's presence in Europe, a market that will account for a much larger share of the combined company's business.

For Persistent, the acquisition is about more than scale; it could propel the company higher in India's IT industry rankings. Investors will now focus on execution, debt repayment, and whether the promised benefits justify the acquisition cost.

“Having secured more than 90% of Nagarro’s share capital and voting rights, Persistent plans a squeeze-out of the remaining minority shareholders of Nagarro upon closing. No final decision has been taken yet,” the company said in its press release on 9 October.

The Pune-based company progressed in three phases.

Persistent's €81-a-share bid for Nagarro, announced in June, gave it 83% ownership by 17 September. A secondary offer later boosted its stake to 94%, paving the way for a full takeover.

For this, the company paid about $1.1 billion, of which $824 million came from the tendered shares and $253 million from Lantano’s stake sale. 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 borrowed up to €1.4 billion ($1.6 billion) from Barclays. This is more than the $1.3 billion that it expected to come from Nagarro’s share repurchase. The company would also have to repay the entire loan amount within 18 months, according to the loan terms.

Still, the company’s plans to acquire an additional 10% did not come out of the blue. Under German law, if a company holds more than 90% of the target entity's shares, the remaining minority shareholders who have not tendered their shares must sell them to the acquiring entity, which will then have to merge the target into itself. In this case, Persistent will have to merge Nagarro into its German entity and remove the entity from the Frankfurt stock exchange.

At least one brokerage said this would help Nagarro’s integration with Persistent.

“A stake above 90% reduces friction in integration. Funding of the acquisition will be partly through debt and partly equity,” said Kotak Institutional Equities analysts Kawaljeet Saluja, Sathishkumar S, and Vamshi Krishna, in a note dated 28 September.

This gains significance as Persistent Systems seeks to jump two spots in Indian it’s pecking order at a time when tech firms are buying growth to offset AI-led revenue deflation. The management stated that the acquisition is expected to be completed by March next year.

Once complete, the combined Persistent-Nagarro Group will have at least $2.7 billion in revenue.Persistent ended last year with $1.65 billion in revenue, up 17.4%, making it the second-fastest growing tech services firm in the country after Coforge Ltd, which grew 29%.

On the other hand, Nagarro ended the 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. After the acquisition, Persistent expects one-fifth of its business to come from Europe, up from one-tenth.

For now, Persistent chief executive Sandeep Kalra said shareholders gave a thumbs up to the acquisition.

“The final results of our offer for Nagarro are a clear endorsement of the strategic logic behind bringing Persistent and Nagarro together. We now look forward to completing the remaining steps toward closing. Together, we will build the global AI-led digital engineering player we envision,” said Kalra, as part of the company’s press release.

Still, at least one analyst is not gung-ho on this acquisition.

“We believe the recent large acquisitions done by the prominent Tier-2 companies like Persistent Systems and Coforge are return dilutive and may pose execution challenges. They also seem to be funded partly or fully through stock dilution,” said Bank of Baroda Capital Markets analysts Girish Pai and Lopa Notaria, in a note dated 9 October.

• Persistent now owns 94%, enabling a complete Nagarro takeover under German law.
• Acquisition could make Persistent India's seventh-largest IT services company.
• Nagarro strengthens Persistent's European business and diversifies its client base.
• Barclays-funded debt raises questions about repayment and future shareholder returns.
• Analysts remain split on integration benefits versus execution and dilution risks.

Jas Bardia

Jas Bardia is a Bengaluru-based business journalist covering India’s information technology (IT) services sector and Global Capability Centres (GCCs). Known for his investigative depth and attention to detail, Jas has a knack for breaking stories on leadership shifts, high-stakes deals, and evolving industry trends long before they hit the mainstream. If the news is anything IT-related, chances are this author has broken it. Before joining Mint in November 2023, Jas honed his financial reporting skills at Bloomberg News in Mumbai, where he covered bonds and currencies following his graduation from the Asian College of Journalism. When he isn’t chasing his next exclusive, Jas is likely scouting the city’s newest culinary spots, cool events, or is immersed in the electric atmosphere of a Bengaluru FC match at the Sree Kanteerava Stadium. Jas has an eye for detail, an ear for history, and a weakness for a great cologne, and values a good conversation as much as a good lead. If you want to talk about your favourite war movie, funny drunk stories, or a supposed “scam”/wrongdoing in a company, get in touch with him at jas.bardia@livemint.com.

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