Persistent Systems fell on Thursday, dropping as low as Rs 5,501, after the company’s board approved a plan to raise up to $1.25 billion.

The fundraise has two parts. The larger piece, up to $1.25 billion, will come through debt instruments such as external commercial borrowings and non-convertible debentures.

Alongside that, the company is weighing a separate option to raise up to $450 million by issuing new shares or convertible securities, through routes like a qualified institutional placement, foreign currency convertible bonds or a preferential issue.

Both routes combined still won’t cross the $1.25 billion ceiling. The equity piece is what spooked investors.

If Persistent actually goes ahead with the $450 million share issue, it could dilute existing shareholders by close to 4.8% at current prices. Nothing is locked in yet though.

The plan still needs approval from shareholders and regulators, and the company hasn’t worked out pricing or picked investors. There’s a reason this fundraise is coming now.

Just over two months back, Persistent said it was buying Nagarro SE for €1.27 billion, a deal meant to bring the two firms together under the Persistent-Nagarro Group banner and build out AI-led digital engineering work.

This new capital raise looks like it’s meant to help fund that acquisition and the company’s next phase of growth.

As of the June quarter, promoter entities held about 30% of Persistent, with founder Anand Deshpande accounting for 29.02% of that group’s holding.

Mutual funds held close to 21%, insurance companies held about 7%, and retail investors owned roughly 10%.

At 10:58 am, Persistent Systems was trading at Rs 5,615 on the NSE, down 1.32% for the day, having clawed back some of its early losses. It’s now down nearly 12% for the year so far.

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