Persistent Systems shares fell to a day low of Rs 5,492 on 16 October, about 5% below the last close, after a 25% drop in Q2 profit.

The fall came a day after the company posted its September quarter results on Thursday, 15 October. Profit after tax stood at Rs 351.51 crore, compared with Rs 471 crore a year earlier.

Most of the gap comes from a one-time charge of Rs 185.34 crore tied to the planned purchase of Nagarro SE, a European technology firm. Leave that out and profit was Rs 495.15 crore, up 5%.

Sales told a stronger story. Revenue rose 30% to about Rs 4,664 crore, and it grew about 8% from the previous quarter. In dollar terms, the yearly rise was 20%.

In a filing on Friday, the company said its board had cleared a plan to borrow up to Rs 9,000 crore to help fund the Nagarro deal.

Rs 8,000 crore will come from bonds called non-convertible debentures, sold privately to selected investors.

The other Rs 1,000 crore will come from 20,000 commercial papers. These are short-term IOUs that run for one year. Both the bonds and the papers will be listed on the NSE.

The Nagarro deal is still not closed. Persistent has secured about 94.04% of Nagarro’s share capital, not counting treasury shares, after its takeover offer period ended.

CEO Sandeep Kalra said on the earnings call that the remaining approvals should arrive in four to six weeks, and eight weeks at the outer limit.

Until the deal closes, he said, the two firms work separately as listed companies and cannot plan their joining in detail.

After closing, Persistent plans to squeeze out Nagarro’s remaining small shareholders.

Kalra said bringing the two firms together could then take five to six months, in an optimistic case.

At 14:45 pm on Friday, the stock traded at Rs 5,700 on the NSE, down 2.40% from the previous close of Rs 5,840. It opened the day at Rs 5,600 and touched a high of Rs 5,709.50.

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