New Delhi, Nov 2 (IANS) Companies that sharply increased research and development (R&D) spending over the past five years delivered significantly stronger stock-market returns than the broader market, a report said on Monday, adding that India’s Gross Expenditure on Research and Development (GERD) stood at Rs 2.45 lakh crore in FY24, equivalent to 0.84 per cent of GDP.
The report from Monarch Alternative Investment Fund (AIF) said 130 companies that increased R&D expenditure at a compound annual growth rate (CAGR) of over 20 per cent between FY21 and FY26 generated an average stock-price CAGR of 23.5 per cent from April 2021 to September 2026, compared with 13.7 per cent for the NSE 500 Total Return Index.
The report stressed that sustained investment in innovation can create long-term shareholder value despite the short-term impact on earnings.
The outperformance was sharper still, where fast R&D growth was backed by meaningful R&D intensity. Nearly 27 companies that spent over 2 per cent of sales on R&D on a three-year basis delivered an average CAGR of 32.5 per cent, more than double the NSE 500 TRI and around 9 percentage points above the broader high-R&D-growth group.
“While cutting research costs may improve reported profitability in the short term, sustained investment in innovation can help businesses develop differentiated products, strengthen competitiveness and build capabilities for future growth,” said Abhisar Jain, Head & Fund Manager – Monarch AIF.
The report highlighted the limited prevalence of high R&D intensity among India’s listed companies, underscoring the scope for greater corporate investment in research and innovation.
Only 28 of over 2,000 listed companies spend over 5 per cent of sales on R&D, while 59 companies spend more than 3 per cent.
“India urgently needs to emulate economies like the US, China and Europe and increase its R&D spend as per cent of GDP to nearly 2 per cent if it aspires to realise its goal of a developed economy by 2047,” Jain added.
Average R&D expenditure as a proportion of sales in India eased from 0.64 per cent in FY16 to 0.56 per cent in FY26.
—IANS
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