Shares of India's Persistent Systems slipped 8.1% on Monday, after the IT services firm offered to buy German firm Nagarro for 1 billion euros ($1.14 billion), according to Reuters calculations.
The stock was trading at 4450 rupees, as of 10:11 am IST, its lowest level since March 2026 and the largest intraday fall since April 2025.
The acquisition would be one of the largest made by an Indian IT firm and will create a $2.9 billion AI-led engineering company.
However, analysts flagged the premium valuations, Nagarro's lower margins and uncertainty around the large merger integration.
The board of the German AI-led digital engineering firm said over the weekend, after the deal was announced, that it intends to recommend the 81 euro per share offer to shareholders. The offer represents a 100% premium to Nagarro's last close on Friday.
The acquisition will expand Persistent's footprint and add verticals such as industrials and automotive to its portfolio, but valuations appear excessive given the German company's relatively low growth profile, UBS analysts said in a note on Monday.
The integration of Nagarro into Persistent would be key to monitor, considering the large size of the investment, analysts from BofA said, maintaining an "underperform" rating on the stock.