Persistent Systems, a mid-tier Indian IT services firm, announced its largest-ever acquisition of Nagarro for $1.6 billion on June 28, 2026. The deal aims to bolster its AI capabilities and global reach, but the market reacted negatively, with Persistent's shares falling 8% on the day of the announcement.
Analysts at Motilal Oswal noted that while the acquisition adds scale and AI talent, the integration of Nagarro's operations and the turnaround of its margins are key risks. Nagarro, a digital engineering firm, has been facing margin pressures due to rising costs and competitive pricing.
Persistent Systems CEO Sandeep Kalra stated that the combined entity would have over 30,000 employees and annual revenue exceeding $2.5 billion. However, the company expects the deal to be margin-dilutive in the first year, with a recovery targeted by fiscal 2028.
The deal comes as Indian IT firms increasingly use M&A to compete with larger players like Tata Consultancy Services and Infosys. Persistent's acquisition is part of a broader trend, with companies like LTIMindtree and Cyient also pursuing acquisitions to enhance AI capabilities.
