ExlService Falls After Confidentiality Breach

ExlService Holdings Inc. (EXLS) tumbled the most since its 2006 public offering after losing a deal with Travelers Cos. (TRV) that accounted for almost 10 percent of revenue because of a failure to protect the insurer’s confidential data.

ExlService, which provides offshore business-process services, plunged 20 percent to $23.36 at 4 p.m. The company has dropped about 12 percent this year.

The vendor said yesterday that Travelers ended a contract after ExlService’s employees shared a confidential document externally. Travelers accounted for 9.6 percent of ExlService’s revenue in the three months through Sept. 30. The end of the agreement may lower the New York-based company’s revenue by $14 million to $28 million next year, according to a filing yesterday.

The announcement “could create a PR issue for EXLS and freeze its deal pipeline in the near term,” analysts at JPMorgan Chase & Co. led by Tien-tsin Huang, said in a research note today, using the company’s ticker symbol. They reduced their rating on the shares to underweight from neutral. The analysts “recommend investors avoid the stock until more clarity is gained on the potential fallout of such a loss.”

ExlService said it fired employees involved in the confidentiality breach, without saying how many were involved. The company also said it’s required to provide Travelers with “disentanglement services” at its own expenses for as long as 18 months. Patrick Linehan, a spokesman for New York-based Travelers, the lone property insurer in the Dow Jones Industrial Average, declined to comment yesterday on the filing.

To contact the reporters on this story: Zachary Tracer in New York at ztracer1@bloomberg.net; Noah Buhayar in New York at nbuhayar@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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