What is ROE (Return on Equity)?
ROE shows how much profit a company generates on shareholders’ money. A core test of how efficiently a business turns equity into earnings.
Return on equity (ROE) measures profit as a percentage of shareholders’ equity — the money owners have put in plus retained profits. It answers: for every ₹100 of owners’ capital, how much profit does the company produce each year? Consistently high ROE is a hallmark of a quality business.
A sustained ROE above ~15% in India usually signals a company that compounds shareholder wealth well. But check how it is achieved: ROE can be pumped up by heavy borrowing (debt boosts returns until it backfires). High ROE with low debt is the gold standard.
Use ROE to compare companies in the same sector and to track a single company over time. A falling ROE can be an early warning that growth is getting harder or the business is taking on risk to keep returns up.
Formula
ROE = Net profit ÷ Shareholders’ equity × 100
Example
A company earning ₹200 crore on ₹1,000 crore of equity has an ROE of 20% — it turns every ₹100 of owners’ money into ₹20 of annual profit.
See it on real companies
Browse live financials and decoded filings, or just ask in plain English.
Common questions
What is a good ROE?
In India, a consistent ROE above roughly 15% is considered strong, but compare within the same industry. Crucially, check whether high ROE comes from genuine efficiency or from high debt.
What is the difference between ROE and ROCE?
ROE measures returns on shareholders’ equity only; ROCE measures returns on all capital, including debt. ROCE is better for comparing companies with different debt levels.