IT companies a gravy train for shareholders

Have reinvested only 13.5% of the cash flows in capex

- Krishna Kant

India's top information-technology (IT) services companies, all cash-rich, have been tightfisted about ploughing back their earnings in new projects or acquisitions and the bulk of the profits have been distributed to shareholders through dividend and share buybacks.

In the past 10 years (that is, excluding the current one), the firms have reinvested in growth and expansion only around 13.5 per cent of the cash flow generated from their operations.

But, on average, nearly 73 per cent of cash profits have been returned to shareholders by way of dividend and share buybacks. Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, and Tech Mahindra have cumulatively generated cash profits worth around ₹8.9 trillion since 2015-16 (FY16) but they put only around ₹1.2 trillion in gross block investment in the period.

Intangibles are generally created when firms make acquisitions. In comparison, shareholders cumulatively earned around ₹6.46 trillion from these top five companies.