India Inc’s Dividend Payout Hits Record ₹5 Trillion in FY25, But Growth Slows Sharply
Muted earnings growth and end of IT buyback boom signal a shift in corporate cash distribution strategies
Dividend Payouts Rise, But Momentum Cools
India’s top listed companies distributed a record ₹5 trillion in dividends in FY25, up 10.8% year-on-year, even as revenue and profit growth remained muted.
- This was the slowest growth in shareholder payouts in five years, primarily due to a sharp fall in share buybacks.
- In contrast, net profits rose just 5.2% to ₹16 trillion, and net sales grew 7.5% to ₹166.4 trillion, as per a study of 1,218 companies across the BSE 500, Midcap, and Small Cap indices.
Share Buybacks Plunge, Dividend Ratio Rebounds
Total shareholder payouts, including dividends and buybacks, edged up only 1.2% to ₹5.08 trillion in FY25, from ₹5.03 trillion in FY24.
- Share buybacks plummeted to ₹8,034 crore, down from ₹50,750 crore in FY24 — their lowest level in nine years.
- As a result, the dividend payout ratio rose to 31.3% in FY25, up from a decade-low of 29.7% a year earlier.
However, the overall payout ratio, including buybacks, fell to 31.8%, down from 33% in FY24, and remains below the 10-year average of 35%.
IT Sector’s Shift in Strategy
Analysts attribute the weak growth in payouts to the virtual end of share buybacks by IT services companies, which had earlier dominated this space.
“The IT sector no longer has an incentive to compensate lower buybacks with higher dividends,” said G Chokkalingam, CEO of Equinomics Research.
- Several firms are now retaining earnings for capex or cushioning against slower revenue growth.
- The shift also reflects the new tax parity between dividends and buybacks, making the former a more neutral option.
Post-Pandemic Payout Boom Winds Down
FY25 marked the second consecutive year of sluggish payout growth, indicating a clear slowdown from the post-pandemic boom:
- Between FY20 and FY23, dividend payments rose at a CAGR of 29.6%, while overall payouts (including buybacks) grew at 28%.
- But in FY24–FY25, this slowed to just 7.4% CAGR for dividends, and 5.7% for total payouts, even as net profits grew at 15.9% CAGR during the same period.
TCS Tops Dividend Payers, Share Buybacks Absent
Tata Consultancy Services (TCS) was the top dividend payer for the second year running, disbursing ₹45,612 crore, up a massive 72.6% year-on-year — with no buyback in FY25, unlike FY24.
- ITC and Infosys followed with payouts of ₹17,958 crore and ₹17,828 crore, respectively.
- Other top payers include Vedanta, HDFC Bank, Coal India, HCL Technologies, ONGC, SBI, and Hindustan Unilever.
- Together, the top 10 firms paid ₹1.9 trillion, contributing to 38% of total shareholder payouts.
These companies hold a combined market cap of ₹425.08 trillion, representing 94.2% of BSE’s total market capitalization as of last Friday.
Outlook: Dividend Discipline and Capital Conservation Ahead
Going forward, Indian corporates appear to be recalibrating their cash distribution policies, balancing between investments and returns to shareholders.
- Buybacks may remain subdued, especially among cash-rich firms in IT and financials.
- Dividend payouts are expected to stabilize, unless capex cycles or growth in core earnings justifies higher distributions.
Analysts see this trend as a sign that India Inc is entering a more measured and sustainable phase in shareholder returns, anchored in long-term capital discipline.
