IT deal manifests SaaSpocalypse opportunity

Infosys

03/07/2026 13:00

The author is a Reuters Breakingviews columnist.  The opinions expressed are her own.
By Shritama Bose
MUMBAI, July 3 (Reuters Breakingviews) - Markets aren't trusting IT outsourcers to get anything right. Shares in India's $7.5 billion Persistent Systems PERS.NS plunged after CEO Sandeep Kalra agreed to pay a 140% premium for its buyout of Germany's Nagarro NA9n.DE. But the $1.45 bln deal helps the buyer meet long-standing strategic goals at knockdown valuation.
After dropping 11% after the acquisition was announced on Saturday, Persistent's stock pared losses but remains 5% below its undisturbed price. The visceral negative reaction channels widespread industry uncertainty about whether acquisitions are a good answer to the AI revenue deflation threat facing the industry since Anthropic and peers launched coding tools.
Indian IT companies are loaded with cash but rarely strike deals, and very few transactions are regarded as successful. Even without a premium, Persistent's returns from its purchase are unlikely to cover the Indian software industry's 10% cost of capital per data from the NYU Stern School of Business, according to Breakingviews calculations.
Yet the acquisition is transformative. It will boost Persistent's presence in Europe, more than doubling the continent's share in its top line to 22%, and give it an entry into the Middle East, Turkey and Japan. As well as reducing its reliance on North America where the Trump administration is making it harder to secure visas for skilled workers that the IT industry needs, the deal will also add capabilities in serving industrial and consumer enterprises as well as governments, where Persistent has limited presence.
The sudden global investor aversion to software stocks handed Persistent an opening to meet these strategic goals at relatively attractive valuations. Nagarro's stock has fallen 46% since the beginning of 2026, twice as much as Persistent over the same period. It is paying 19 times Visible Alpha's estimates of the target's 2026 earnings, less than its own 29 times.
Given investors are anyway in the mood to punish IT companies and pushing back against attempts by others like $44 billion Infosys INFY.NS to boost buybacks, the downside of making a bold acquisition is limited.
Follow Shritama Bose on LinkedIn and X.
     
CONTEXT NEWS
Persistent Systems on June 27 said it would launch an offer for all outstanding shares in Munich-headquartered Nagarro Group, valuing it at $1.45 billion including debt. The offer of 81 euros ($92.12) per share represents a 140% premium to the last traded price before the deal was announced.

(Editing by Una Galani; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on BOSE/shritama.bose@thomsonreuters.com))