Persistent Systems hits new high on buying SoHo Dragon assets worth $4.7 mn

Persistent Systems shares rose 1.8 per cent to hit an all-time high of Rs 5,369.25 per share on the BSE after the company signed an asset purchase agreement with SoHo Dragon to acquire some of its assets. 

At around 2:44 PM, shares of Persistent Systems were up 0.77 per cent at Rs 5,3213.65 per share. By comparison, the BSE Sensex was down 317.83 points at 81,603.43.

Regarding the acquisition of assets, the company, in an exchange filing, said, "We hereby inform you that Persistent Systems Limited and Persistent Systems, Inc., have entered into an Asset Purchase Agreement with SoHo Dragon Inc. for the acquisition of its identified assets on September 10, 2024".

The company added that select employees, contractors and a customer contract will also be acquired by Persistent Systems, and the annual revenue from these assets is estimated to be $9.3 million. The acquisition of assets is expected to be completed within 4-8 weeks.

Soho Dragon is primarily involved in the business of providing IT services to BFSI players. Persistent System, in its exchange filing, said the acquisition of the assets from SoHo Drago will help the company consolidate its relationship with a strategic and large customer in the BFSI domain.

Meanwhile, the total purchase consideration payable for the acquisition is $ 4.70 million, which includes an upfront payment of $3.09 million, a maximum cumulative earnout of $1.49 million over three years, and a retention payment of $0.12 million for the retention of a few key employees.

It should be noted that the acquisition of shares of SoHo Dragon is not involved in this transaction.

That apart, brokerage firm JM Financial has raised its target price for Persistent Systems to Rs 6,030 from Rs 5,240 per share, while maintaining a 'Buy' rating on the IT services company.  

The brokerage firm believes Persistent Systems’ strength in data systems, product engineering, and ecosystem partnerships (Hyperscalers, data platforms) positions it relatively upstream compared to traditional IT services players in the GenAI value chain.

Thus, the brokerage firm has raised its target multiple to 48x from 45x earlier. Additionally, JM Financial suggests revenue as well as booking momentum for the company has continued into Q2 with leakages stabilising, which will start to flow into FY26 revenue visibility.

"We forecast 18 per cent/24 per cent USD revenue/EPS CAGR over FY25-27E," JM Financial stated.

In the past one year, shares of Persistent Systems have gained 77.7 per cent, compared to the BSE Sensex's rise of 22 per cent during the same period.