Infosys McCamish revenue drops amid cyberattack, weak demand
MUMBAI, INDIA — Infosys McCamish Systems, a subsidiary of Infosys, has reported its first annual revenue decline in eight years.
According to its recent annual report, the company’s revenue fell by 4.3% to $442 million for the year ending December 2023.
This marks a significant downturn for the Atlanta-based insurance process management solutions provider, which has not seen a revenue decline since 2015.
Impact of ransomware attack
The revenue drop has been largely attributed to a ransomware attack that occurred in November 2023, which severely disrupted the company’s operations.
Analysts from Kotak Institutional Equities, including Kawaljeet Saluja, Satishkumar S, and Vamshi Krishna, noted that the “muted demand environment compounded by the impact of the ransomware attack” led to the decline in both revenue and margins.
A Mumbai-based analyst, who requested anonymity, confirmed that the cyber attack forced the company to incur significant costs to repair the damages.
Financial consequences
The financial impact of the ransomware attack was substantial. Infosys McCamish’s net profit plummeted by 69% to $10.7 million, and its operating margins fell by 570 basis points to 3.4%.
The company had to deploy a third-party cybersecurity provider to address the issue, incurring costs related to remediation, restoration, communication efforts, investigative processes, and legal services, amounting to approximately $30 million.
It remains unclear whether these costs were borne by Infosys or McCamish.
Data breach and legal repercussions
The ransomware attack also led to a significant data breach, affecting 57,028 clients whose personal information and social security numbers were compromised.
This has resulted in a class-action lawsuit filed in a Georgia district court on March 6, 2024, against Infosys on behalf of the affected individuals.
The plaintiffs accused Infosys McCamish of concealing the extent of the data breach for an unreasonable duration and failing to protect their information. Infosys has yet to respond to the lawsuit.
Infosys’ $58 million McCamish acquisition
Infosys acquired McCamish Systems in December 2009 for $58 million through its subsidiary Infosys BPO, now known as Infosys BPM Ltd.
The acquisition was part of Infosys’s strategy to scale up its business process outsourcing unit. Despite the recent setbacks, Infosys BPM remains one of Infosys’s largest subsidiaries, with a revenue growth of 2% to $953 million as of March 2023.
Infosys, the parent company, reported $18.6 billion in revenue for the financial year ending March 2024, with 27% coming from its financial services business.
However, the slow or minimal growth of its subsidiaries, including Infosys McCamish, resulted in a modest overall revenue growth of 1.9%, the slowest among the top three Indian IT services companies.
As Infosys McCamish navigates the aftermath of the cyber attack and the ongoing legal challenges, the company will need to focus on strengthening its cybersecurity measures and rebuilding client trust to regain its growth trajectory.
