Nomura on Wednesday maintained its 'buy' rating on Persistent Systems and said the stock remains its top pick among midcap IT service providers. The brokerage, however, brought down its target price for Persistent Systems shares to Rs 5,530 from Rs 5,440.
The brokerage said the MediaAgility acquisition will bolster Persistent System' Cloud offerings but is mildly earnings per share (EPS) dilutive in the near term.
Nomura trimmed its FY23-24F EPS estimates by 1.6-2.3 percent.
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On Monday, Persistent announced the acquisition of New Jersey-based Cloud technology firm MediaAgility for $71.7 million (about Rs 548 crore) in an all-cash deal.
The company will make an upfront payment of $53.3 million to MediaAgility shareholders, according to a regulatory filing. MediaAgility shareholders will also be eligible for the maximum cumulative earn-out of $17.8 million over the next two years subject to performance thresholds, it said.
Nomura believes the acquisition will bolster Persistent's partnership with Google Cloud. Persistent has built strong capabilities in five key Cloud ecosystems either organically or inorganically, it said.
Strong revenue growth will offset the headwind created by the ammortisation from the acquisition in the medium term, according to the brokerage.
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