Persistent Systems to raise Rs 6,000 crore via NCDs for Nagarro deal

Mumbai: Information technology company Persistent Systems is likely to raise more than Rs 6,000 crore through the issuance of non-convertible debentures (NCDs) of various tenures as it finalises financing of its acquisition of Germany’s Nagarro SE.

The debt could be raised as early as next week as the IT company aims to complete its acquisition announced in June.

"This is the second part of the fundraising after the company raised Rs 4,264 crore through a QIP (qualified institutional placement) of shares earlier this week. The NCDs will be of various tenures matching the cash flows of the company starting from a year going up to five years with an average maturity of about 3 years," said a person familiar with the details.


The money raised through the NCDs will replace the short-term, 18-month bridge financing commitment the company had secured from Barclays. The NCDs are likely to be priced between 8.75% and 9.50% and underwritten by HSBC and Barclays. Both banks declined to comment.

"There is a small part of the deal that will most likely include a one-year lot of commercial paper with the rest being NCDs. The longer tenure proceeds will most likely be earmarked for general corporate purposes,” said a second person aware of the details.

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In June, Persistent launched a voluntary public takeover offer to acquire all outstanding shares of Nagarro SE through its subsidiary Galaxy Germany Holding in what is one of the biggest overseas acquisitions by an Indian IT services company.

Earlier this month, Persistent announced that the company had secured 94% of Nagarro shares after receiving shareholders offers representing approximately 71.94% to add to the approximately 22.10% stake already secured by Persistent earlier.

"The total value that Persistent has to pay comes to around $1.25 billion out of which $450 million has been raised via a QIP. The rest of the money will be raised by debt as the company does not want to keep a short term bridge loan on its books which will have to be refinanced ultimately," said a third person aware of the details.

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Persistent did not reply to an email seeking comment.

Higher overseas rates have made dollar funding difficult for Indian banks. However, easy liquidity locally and cheaper dollar swap costs means that it could be cheaper to raise rupee funds and swap it to dollars to take abroad.

To be sure, local corporate bond yields have spiked after the RBI indicated that rates will be on the way up from hereon. For example top rated NABARD which raised three year funds at 7.50% earlier this month could pay 8.25% for a similar tenure now.

For AA+ companies like Persistent this 50 to 75 basis points increase in yields has made borrowing more expensive but it is still cheaper when considering the high overseas rates.