Persistent Systems Prepares Major Domestic Bond Fundraising

Persistent Systems is preparing to raise up to ₹8,000 crore through its first rupee-denominated bond issuance, marking a significant step in financing its acquisition of Germany-based technology services company Nagarro.

The Pune-headquartered digital engineering and enterprise modernisation company plans to issue bonds with maturities ranging from one to five years, according to bankers familiar with the proposed transaction.

The fundraising is expected to take place later in October 2026, with proceeds intended primarily to refinance a bridge loan arranged earlier this year to support the Nagarro acquisition.

The planned transaction represents one of the more substantial domestic debt fundraising exercises by an Indian information technology services company.

On October 16, 2026, Persistent Systems also disclosed that a special committee of its board had approved the issuance of up to ₹8,000 crore in non-convertible debentures and an additional ₹1,000 crore in commercial paper through private placements.

The financing reflects the company's efforts to establish a longer-term capital structure following its expansion into the European technology services market.

Bond Issue to Feature Five Maturity Categories

Persistent Systems is planning a diversified bond structure involving securities with maturities of one, two, three, four and five years.

By distributing repayments across multiple maturity periods, the company can reduce its dependence on a single refinancing date and manage future repayment obligations more systematically.

The proposed securities will be denominated in Indian rupees, allowing the company to access domestic institutional investors and capital market funding.

The company has received an AA+ credit rating from domestic rating agency ICRA for the proposed bonds.

An AA+ rating indicates a high degree of safety regarding timely servicing of financial obligations, although it does not eliminate credit or investment risks.

The eventual borrowing cost will depend on investor demand, prevailing interest rates, liquidity conditions and the final structure of the issuance.

The bonds are proposed to be listed on the National Stock Exchange.

The approved non-convertible debenture programme provides for the issuance of up to 800,000 securities through private placement.

The company has not publicly confirmed the final coupon rates or allocation across the different maturity categories.

Nagarro Acquisition Drives Persistent Systems' Financing Requirements

The proposed debt issuance is directly connected to Persistent Systems' acquisition of Nagarro, a Germany-headquartered digital engineering and technology consulting company.

Persistent Systems has acquired approximately 94% of Nagarro's share capital and is pursuing the remaining minority ownership as part of its broader takeover strategy.

The total financing requirement for acquiring full ownership is estimated at approximately $1.25 billion.

The acquisition represents a major strategic expansion for Persistent Systems, which has been strengthening its presence in artificial intelligence, cloud engineering, enterprise software modernisation and digital transformation services.

Nagarro brings an established European client base, international delivery capabilities and expertise across several technology-intensive industries.

The transaction is expected to expand Persistent Systems' geographical footprint and reduce its relative dependence on North American business.

Persistent Systems has also indicated its intention to pursue Nagarro's delisting from the Frankfurt Stock Exchange following completion of the necessary acquisition procedures.

The planned bond issue will help address financing obligations associated with this international expansion.

Refinancing Bridge Loan With Domestic Debt

Persistent Systems initially arranged bridge financing to support the Nagarro transaction.

Bridge loans are generally short-term borrowing arrangements used to fund acquisitions or other major corporate transactions until more permanent financing becomes available.

Although they provide immediate access to capital, bridge facilities typically require refinancing or repayment within a relatively limited period.

The proposed rupee bond issuance is intended to replace a substantial portion of this temporary acquisition financing.

Moving from bridge debt to bonds with staggered maturities can improve repayment planning and provide greater flexibility in managing cash flows.

It can also diversify funding sources by reducing reliance on the original acquisition lender.

However, refinancing does not automatically reduce the company's total indebtedness.

The financial benefits will depend on the interest rates, repayment schedules and other conditions attached to the new securities.

Persistent Systems will therefore need to balance financing costs against the operational and strategic benefits expected from the Nagarro acquisition.

Company Revises Funding Strategy to Include Equity

Persistent Systems initially considered financing the Nagarro acquisition entirely through debt.

The company has subsequently adopted a financing strategy that includes both borrowings and potential equity fundraising.

According to ICRA's assessment, Persistent Systems plans to raise up to $450 million through equity, with the remaining acquisition funding requirement covered through debt.

Shareholders approved the broader financing arrangements at an extraordinary general meeting held on October 5, 2026.

The company has also received approval for borrowing and fundraising arrangements linked to the acquisition, with the combined equity and borrowing framework capped at approximately $1.25 billion.

Introducing an equity component could reduce the amount of debt required and help contain leverage following the acquisition.

However, equity fundraising may dilute existing shareholders' ownership interests, depending on the instruments issued and the final terms.

The financing structure therefore presents a balance between maintaining financial flexibility and managing shareholder dilution.

For investors, the eventual combination of bonds, commercial paper and equity will be important in evaluating the company's post-acquisition capital structure.

₹1,000 Crore Commercial Paper Programme Also Approved

Alongside the proposed ₹8,000 crore bond issuance, Persistent Systems has approved raising up to ₹1,000 crore through commercial paper.

Commercial paper is a short-term debt instrument commonly used by companies to meet working capital requirements and other near-term financing obligations.

The approved commercial paper programme will be undertaken through private placement, with the securities proposed to be listed on the National Stock Exchange.

The commercial paper will have a tenure of up to one year from allotment.

Together, the approved non-convertible debenture and commercial paper programmes provide for potential debt issuance of up to ₹9,000 crore.

This amount represents approved fundraising capacity rather than confirmation that the entire amount has already been raised.

The combination of short-term and medium-term debt instruments could provide flexibility in managing the timing of acquisition-related payments and refinancing requirements.

Nagarro Deal Expected to Expand Global Technology Services Business

Persistent Systems' acquisition of Nagarro is designed to create a larger international digital engineering and enterprise modernisation platform.

The companies have complementary capabilities across artificial intelligence, enterprise resource planning, cloud services, customer experience technology and software engineering.

Based on the companies' previously announced combination estimates, the enlarged business could have an annual revenue run rate of approximately $2.9 billion.

The combined organisation is expected to have more than 46,000 employees across over 40 countries.

A particularly important strategic benefit is Nagarro's established presence in Europe.

Persistent Systems has historically generated a substantial proportion of its revenue from North America.

Nagarro's European operations could provide greater geographical diversification and strengthen access to clients in automotive manufacturing, industrial engineering and enterprise technology.

The companies have indicated that Europe's contribution to Persistent Systems' revenue mix could increase from approximately 9% to 22% following the combination.

The transaction is also expected to expand relationships with multinational businesses across banking, healthcare, technology and manufacturing.

These projections remain dependent on successful integration and the realisation of anticipated commercial benefits.

Acquisition Financing Places Focus on Leverage and Cash Flow

The size of the Nagarro acquisition has brought Persistent Systems' financial leverage into sharper focus.

Large acquisitions financed substantially through debt can increase interest expenses and place additional demands on operating cash flows.

Persistent Systems will need to ensure that the combined business generates sufficient cash to meet borrowing costs, fund ongoing operations and support future investment.

The company must also manage integration expenses, technology investments and potential restructuring requirements associated with combining two international organisations.

Although the acquisition is expected to provide greater scale and market access, the financial benefits may emerge over several reporting periods.

Investors are likely to monitor the company's net debt position, interest coverage, operating margins and free cash flow generation.

The pace at which acquisition-related debt is reduced will also be an important measure of financial execution.

Persistent Systems has previously indicated that it expects leverage to decline meaningfully over approximately two years following completion of the transaction.

The actual outcome will depend on operating performance, financing conditions and integration progress.

Persistent Systems Reports Revenue Growth Amid Profit Pressure

The financing announcement follows Persistent Systems' financial results for the quarter ended September 30, 2026.

The company reported consolidated revenue of approximately ₹4,663 crore for the second quarter of FY2026-27, representing growth of about 30% compared with the corresponding period of the previous financial year.

Revenue also increased approximately 8% sequentially.

However, consolidated net profit declined by approximately 25% year-on-year to ₹351 crore, compared with ₹471 crore in the year-earlier quarter.

Profit also fell from approximately ₹483 crore in the preceding quarter.

The divergence between revenue growth and profitability highlights the importance of maintaining margins while undertaking a substantial international acquisition.

The Nagarro transaction introduces additional financing and integration considerations that investors will need to evaluate alongside Persistent Systems' underlying business growth.

The company's ability to translate higher revenue into sustainable cash generation will be particularly relevant as acquisition-related repayment obligations begin to mature.

Domestic Bond Market Becomes Important for Acquisition Financing

Persistent Systems' proposed transaction also highlights the increasing use of India's domestic corporate bond market for financing large international acquisitions.

Indian companies have traditionally relied on bank loans, overseas borrowing facilities and equity issuance to fund major acquisitions.

However, rupee-denominated bonds can provide an alternative source of capital, particularly for companies with strong credit profiles and access to institutional investors.

Bond financing may offer flexibility in selecting maturity periods and structuring repayment schedules.

Domestic debt instruments can also help companies diversify their borrowing arrangements.

Nevertheless, companies undertaking international acquisitions must carefully manage currency exposures when rupee-denominated obligations are used alongside foreign-currency assets and cash flows.

The attractiveness of domestic bonds will ultimately depend on interest rates, investor appetite and the availability of alternative financing.

Persistent Systems' proposed issue could provide an indication of institutional demand for acquisition-related debt from India's technology services sector.

Investors to Monitor Pricing and Final Fundraising Structure

Several aspects of the proposed bond transaction remain important for investors and market participants.

The final interest rates, maturity-wise allocation, investor participation and timing of issuance will determine the company's borrowing costs.

The execution of the proposed equity fundraising will also influence the amount of debt ultimately required.

Investors will additionally assess how quickly Persistent Systems completes the remaining Nagarro acquisition procedures and advances the integration of the two businesses.

The company's ability to preserve margins, retain major clients and generate operating cash flows will be central to the financial success of the transaction.

While the AA+ credit rating provides an indication of credit quality, the enlarged company's financial performance will remain the decisive factor in its ability to manage acquisition-related obligations.

Conclusion

Persistent Systems' proposed ₹8,000 crore debut rupee bond issue marks a significant development in the financing of its Nagarro acquisition and broader international expansion strategy.

The planned issuance, featuring maturities from one to five years, is intended to refinance temporary acquisition borrowing and establish a more structured repayment profile.

The company's approval of an additional ₹1,000 crore commercial paper programme and plans to raise up to $450 million through equity demonstrate a diversified approach to financing the transaction.

The Nagarro acquisition could substantially expand Persistent Systems' global presence, strengthen its European operations and broaden its digital engineering capabilities.

However, the scale of the transaction also introduces challenges involving financial leverage, interest expenses, shareholder dilution and business integration.

The ultimate success of the financing strategy will depend on the company's ability to complete the fundraising on favourable terms and convert the enlarged business into sustainable earnings and cash flow growth.