India Inc payout grows slower than profit for third straight year

Dividend payout ratio down at 25.7% in FY26, the lowest in 12 years

Shareholder payouts by India Inc through dividends and buybacks rose 2.2 per cent year-on-year (Y-o-Y) in FY26 to ₹5.06 trillion. Though this marked a slight improvement over the 1.6 per cent growth recorded in FY25, payouts lagged earnings growth for a third consecutive year.

 

The combined reported net profit of 1,495  listed firms in the sample rose 18.8 per cent Y-o-Y in FY26, while adjusted net profit, excluding exceptional gains and losses, increased 14.9 per cent in the year. As a result, the dividend payout ratio — the proportion of net profit given to shareholders — fell to 25.7 per cent in FY26, the lowest in at least 12 years. The ratio had fell to 29.8 per cent in FY25 from a record 61.4 per cent in FY20, when the Covid-19 pandemic triggered a sharp fall in corporate earnings and inflated payout ratios. Over the past 12 years, the average payout ratio has been about 40 per cent. 

The modest increase in shareholder payouts during FY26 was driven entirely by a surge in share buybacks, while equity dividends declined marginally.

 

The 1,495 companies in the Business Standard sample paid a combined ₹4.86 trillion in equity dividends in FY26, compared with ₹4.87 trillion in FY25. In addition, 14 companies spent ₹19,378 crore on share buybacks during the year, up sharply from ₹7,827.5 crore spent by 32 companies in FY25.

 

The increase in buybacks was almost entirely attributable to Infosys, which completed an ₹18,000 crore buyback in September last year. The company also distributed ₹19,430.4 crore in equity dividends in FY26, taking its total shareholder payout to ₹37,430.4 crore during the financial year.

 

This was Infosys’ highest-ever annual payout and translated into a payout ratio of 127.1 per cent. In comparison, the company returned ₹17,828 crore to shareholders in FY25, entirely through dividends, implying a payout ratio of 66.7 per cent.

 

The combined reported net profit of companies in the sample increased to ₹19.71 trillion in FY26 from ₹16.59 trillion a year earlier. Adjusted net profit rose to ₹18.32 trillion from ₹15.95 trillion over the same period. The payout ratio has been calculated using reported net profit, in line with convention.

 

The modest growth in shareholder payouts despite double-digit earnings expansion led to a sharp rise in retained earnings -- the portion of profits kept on corporate balance sheets rather than distributed to shareholders. Combined retained earnings rose 25.9 per cent Y-o-Y to ₹14.66 trillion in FY26 from ₹11.64 trillion in FY25.

 

Companies typically deploy retained earnings to fund capital expenditure, pursue acquisitions, build cash reserves, or invest in liquid financial assets such as government securities and mutual funds.

 

The combined cash and bank balances of companies in the sample increased 12.3 per cent Y-o-Y to around ₹18 trillion at the end of FY26, from ₹16.02 trillion a year earlier. Total investments, including holdings in bonds, debentures and mutual fund units, rose 6.4 per cent to around ₹19 trillion from ₹17.86 trillion.

 

In contrast, the combined fixed assets of these companies increased by just 2.1 per cent to ₹81.91 trillion at the end last financial year.

 

Among individual companies, Tata Consultancy Services remained the country’s largest dividend payer, despite a 12.7 per cent decline in total shareholder payouts. The company distributed ₹39,820 crore in dividends for FY26, compared with a record ₹45,612 crore in FY25.

 

Infosys ranked second with total payouts of ₹37,430.4 crore, followed by HDFC Bank (₹23,859.8 crore), ITC (₹18,167.8 crore) and Oil and Natural Gas Corporation (₹16,668.9 crore). Other major payers included Coal India, State Bank of India, HCL Technologies, Bharti Airtel and Power Grid Corporation.

 

Together, these 10 companies accounted for 41.6 per cent of all shareholder payouts, including buybacks, by listed companies in FY26, up from 36 per cent in FY25.