Persistent Systems Ltd. announces a capital-allocation move

The specific end-use cannot be confirmed from the Letter of Offer disclosure. The company did not separately disclose an itemized allocation of the proceeds between inorganic growth/M&A and general corporate purposes for FY27.

Accordingly:

• M&A/inorganic growth: No explicit earmarking can be confirmed.
• General corporate purposes: No specific quantified allocation can be confirmed either.
• Analytical conclusion: It would be unsupported to characterize the ₹7,000 Cr issuance as being specifically raised for M&A. The proceeds should instead be treated as having an unspecified or broad stated purpose unless the Letter of Offer contains a more detailed use-of-proceeds clause not captured in the cited material.

The confirmed NCD terms are an 8.95% annual coupon, six series with two- to five-year tenors, and a mixed secured/unsecured structure. At the full ₹7,000 Cr issue size, the coupon implies approximately ₹626.5 Cr of annual interest expense. On a pro forma TTM basis, this would reduce interest coverage to roughly 3.31x, versus 23.19x before the issue and 34.18x in FY26, when total debt was zero.

Confirmed NCD terms

Interest-coverage impact

Using the same EBIT-to-finance-cost convention reflected in the reported coverage ratio:

• TTM Q2 FY27 EBIT was ₹2,420.1 Cr ^[3].
• TTM Q2 FY27 finance costs were ₹104.35 Cr ^[4], producing reported interest coverage of 23.19x ^[5].
• Annual NCD coupon cost is ₹626.5 Cr, derived from ₹7,000 Cr ^[1] × 8.95% ^[2].
• Pro forma finance costs become approximately ₹730.85 Cr, assuming the full issue remains outstanding for a full year.
• Pro forma interest coverage = ₹2,420.1 Cr ÷ ₹730.85 Cr = 3.31x, derived from the cited EBIT and pro forma finance cost.

This represents an approximate 19.88x decline, or 85.7% lower coverage, versus the pre-issuance TTM level of 23.19x. It is also well below FY26’s 34.18x coverage, when total debt was reported at zero ^{[6] [7]}.

The 3.31x figure is an analyst-derived run-rate, not company guidance. It assumes no earnings contribution from the financed transaction, no cash-interest offset, no refinancing, and no difference between the contractual coupon and eventual reported finance cost. The NCD allotment occurred on 4 November 2026, so the Q2 FY27 financials precede the debt issuance ^[1].

The ₹70 billion raise equals ₹7,000 Cr and represents a step-change for Persistent: it is larger than the current gross debt of every named peer and would move Persistent from a zero-debt, net-cash position to approximately 0.81x gross debt/equity, using Q2 FY27 book equity as the denominator. The issuance disclosure cited here does not confirm whether future dividends or additional borrowing are restricted.

Capital structure comparison

• Scale: ₹7,000 Cr is approximately 1.24x Coforge’s, 3.90x MphasiS’s and 3.21x Tech Mahindra’s current reported gross debt; these are derived from the ₹7,000 Cr issuance amount ^[26] and the peer debt balances above.
• Persistent pro forma leverage: Persistent had ₹8,589.4 Cr of equity at Q2 FY27 ^[27]. Dividing ₹7,000 Cr by that book equity gives a mechanical pro forma gross debt/equity ratio of 0.81x, before considering any acquisition accounting, equity issuance, cash deployment or post-acquisition EBITDA.
• Relative positioning: Persistent would therefore be more levered than its current pre-raise position and above the current gross leverage of all listed comparators in the table. Coforge is the closest comparison on absolute debt, but its reported balance sheet already includes substantially higher leverage, including net debt/EBITDA of 3.07x ^[13].
• Comparability caveat: MphasiS is on Q1 FY27 because its Q2 FY27 results were not the latest reported in the KPI series, while Tata Elxsi is standalone; the comparison is directional rather than perfectly synchronized.

What the issuance disclosure says about restrictions

The NCDs were reported as six series with an 8.95% coupon and two- to five-year maturities ^[26]. The reported structure includes secured series backed by pledges over Nagarro SE and Bidco assets, while Series 3 and 4 were unsecured and aggregated ₹2,500 Cr ^[2].

However, the cited issuance summary does not provide the substantive debenture covenant package. Specifically, the presence or absence of:

• a dividend or restricted-payments limitation;
• a maximum leverage or debt-incurrence test;
• mandatory prepayment triggers; or
• restrictions on additional secured borrowing

could not be confirmed from the cited material. Persistent’s website references an executed debenture trustee agreement, but the substantive agreement terms are not reproduced in the available disclosure ^[28]. A security pledge should not itself be interpreted as a covenant limiting dividends or future leverage.