Persistent eyes $5 billion annual revenue by 2031 with mega Nagarro buyout
Persistent Systems Ltd is looking to anchor its long-standing European ambitions and hit a $5 billion revenue target by March 2031 through its largest-ever acquisition
Persistent Systems Ltd is looking to anchor its long-standing European ambitions and hit a $5 billion revenue target by March 2031 through its largest-ever acquisition, German digital engineering firm Nagarro. The deal is expected to propel the company up two spots to become India’s seventh-largest IT services firm, boasting a combined revenue of about $2.9 billion. During an analyst call on Sunday, the company’s management outlined the strategic rationale behind the mega-deal and addressed analysts’ queries regarding debt repayment. “They (Nagarro) are a key implementation partner for SAP, whereas our ERP (enterprise resource planning) progress is not necessarily at scale, so these kinds of additions are fairly important to us,” Sandeep Kalra, chief executive of Persistent Systems, said during the call. He added that Nagarro’s product engineering capabilities for SAP and its partnership with OpenAI are key additions to Persistent’s portfolio. IT services firms do not typically disclose specific revenues generated from software embedding or individual AI partnerships. Kalra also noted that Nagarro is among a select group of accredited OpenAI resellers and has a specialised engineering team dedicated to deploying its technologies. Nagarro’s slower growth The analyst call took place a day after the company proposed a $1.3-billion purchase of Nagarro, in which Persistent Systems would pay €81 per share to acquire the entire equity of Nagarro SE.
The deal is expected to close by March 2027, after which the combined entity will operate as the Persistent-Nagarro Group. The Pune company ended FY26 with $1.65 billion in revenue, up 17% from the previous year. Nagarro’s growth has been slower. It ended last year with $999 million, up 2.8% on a yearly basis. Nagarro follows the January-December financial year, unlike Indian IT firms, which follow April-March. Addressing concerns over Nagarro’s sluggish growth, Kalra explained that the numbers do not reflect the company's true potential. From a big-picture perspective, he noted that Nagarro grew by more than 5% on a constant-currency basis despite a challenging market. Kalra attributed the recent slowdown to temporary internal distractions. "And keep in mind, if I may say so, they were distracted for some time when they were taking a transaction to take Nagarro private in the last year,” said Kalra. Nagarro's profitability also lags behind Persistent's. Last year, Nagarro posted an operating margin of 10.9%, compared to Persistent’s 15.6%, which had expanded by 90 basis points over the previous year. Management said the combined entity’s operating margins would not be lower than Persistent’s overall margins as the company would engage in cost synergies and re-invest its cash in new growth areas. Management is mulling over doing away with tail accounts once the acquisition comes into effect.
The BriefWire