India’s IT giants are partly responsible for why we don’t have more deep tech startups. Let me explain with a India vs US comparison.
TCS made ~$24B in net profit over the past five years and paid out all of it, yes 100% of this, to shareholders through dividends and buybacks. Infosys, HCL, Wipro, TechM have paid out 60-90% of their profits in the same period.
They’ve imposed a massive opportunity cost by sitting on vast capital and talent without building IP-rich or research-led organizations. What’s the consequence of this obsession with returning cash? They spend less than 1% of their revenues on R&D.
Contrast this with the US big tech cos (Magnificent 7) with low dividend payout ratios. In fact, Amazon and Tesla don’t pay dividends at all and reinvest all earnings into growth and research.
Mag 7 companies on average spend 12% of their revenue on R&D. Meta leads with 27%, with Alphabet at 14%. At their scale, this translates to high absolute R&D expenditure ($230B between these seven companies last year).
US companies reshaped global technology by over-investing in R&D, often ahead of market readiness. Their deep tech outcomes were the product of a culture that supports high-risk, high-reward strategic bets with long horizons and uncertain outcomes.
Indian IT firms contribute selectively to foundational research, rarely open source their tools, fund PhD programs, or incubate moonshot ideas despite having the capacity.
They were vital in placing India on the global tech map. But it’s time for them to start building the next Google X.
Shareholder returns and moonshot thinking can co-exist. We should export more innovation from India, not just services.