Persistent Systems shares fall 4% ahead of Sept 2 board meet, fundraise in focus

Persistent Systems

shares fell nearly 4% on Monday after the IT services company announced that its board will meet on September 2 to consider raising funds through debt and equity instruments, including external commercial borrowings (ECBs), non-convertible debentures (NCDs), a Qualified Institutions Placement (QIP), foreign currency convertible bonds (FCCBs) and preferential issue.

The proposed fundraise comes just months after Persistent completed its acquisition of Nagarro, a deal that significantly changed the company’s balance sheet and funding profile.

In June, when Persistent announced the acquisition of Nagarro for an enterprise value of around €1.27 billion, or roughly ₹13,600 crore, management had indicated that it did not expect to raise equity through a QIP to fund the transaction.

Persistent CEO Sandeep Kalra had told CNBC-TV18 on June 29 that the company was not looking at a QIP for the acquisition and would not need one for the transaction.

The acquisition was initially planned to be financed through a €1.4 billion bridge loan. The bridge financing was understood to be temporary, with a tenor of around 18 months, leaving the company with the need to eventually term out the borrowing through longer-term debt and/or equity.

That funding question is now back in focus.

Persistent’s proposed fundraise has also raised the question of whether a large acquisition could eventually lead to meaningful equity dilution. Nagarro’s enterprise value of around €1.27 billion compares with Persistent Systems’ market capitalisation of roughly ₹88,500 crore, making the acquisition a sizeable transaction relative to the company.

The deal also marks a shift in Persistent’s financial position, with the company moving from a net cash position to a more leveraged balance sheet following the acquisition.

The September 2 board meeting will therefore be closely watched for the mix of instruments Persistent chooses and whether equity fundraising becomes part of the financing strategy. The company has not yet indicated the size of any potential issue or whether a QIP will ultimately be pursued.

The announcement came as broader markets faced pressure on Monday. Shares of several small- and mid-cap companies fell as much as 5%, underperforming the benchmark indices.

Persistent Systems was among the biggest losers, with the stock down more than 4% during the session. Broader IT stocks also remained under pressure amid concerns over hawkish comments from Federal Reserve officials and the potential impact of higher US interest rates on the sector.

The Nifty Smallcap 100 index fell 112 points, or 0.6%, to trade below 20,000. Kaynes Technology dropped more than 5%, while Wockhardt and Jyoti CNC fell around 4% each.

Other notable small-cap losers included Poonawalla Fincorp, Netweb Technologies, GE Shipping, Inox Wind, Angel One, Piramal Pharma, IIFL Finance, Bandhan Bank, GRSE, Anant Raj, Manappuram Finance, Tata Technologies and Reliance Power.

As of [time], shares of Persistent Systems were trading at ₹5,657 on the NSE, down 3.71%, or ₹218, from the previous close.