| Ticker | BDL |
| Company name | Bharat Dynamics Ltd: |
| Shariah Compliance | Pass |
| DP Ratio | 0.0421 |
Report Published as on 31st May 2024
We have conducted a comprehensive review on Bharat Dynamics Ltd from a Shariah point of view and analysed its sources of income to know whether they are complying with Shariah principles.
Bharat Dynamics Limited (BDL) is one of India’s manufacturers of ammunitions and missile systems. It was founded in 1970 in Hyderabad, India. BDL is primarily engaged in manufacturing guided missiles and allied defense equipment. It plays a crucial role in India’s defense sector by catering to the requirements of the Indian Armed Forces.
Bharat Dynamics Limited (BDL) generates its revenue primarily from the sale of its defense products and services to various customers, including the Indian Armed Forces, other Indian government agencies, and international clients. The revenue stream can be broken down into several components.
Let’s have a look at the operating segments from which the company derives its revenue and apply the Shariah screens to them:
Operating Revenue: (All figures in Lakhs of INR for the Year ended March 31st, 2023)
| Segments | Revenue | Non-Permissible Revenue | % of Non-Permissible Revenue | Non-Permissible Segment Classification | Comments |
| Sale of products -Finished Goods | 2,20,115.67 | – | – | – | Sale of products |
| -Spares | 16,104.75 | – | – | – | – |
| -Miscellaneous | 2,233.48 | – | – | – | – |
| -LD refunded / (levied) by Customers | – (3,073.90) | – | – | – | – |
| Repairs and Overhauls | – | – | – | – | – |
| Sale of services- Repairs and Overhauls | 3,788.23 | – | – | – | Sale of services |
| – Job Works | 7,703.28 | – | – | – | – |
| -Miscellaneous | 22.24 | – | – | – | – |
| -LD refunded / (levied) by Customers | 9.12 | – | – | – | – |
| Sale of Scrap | 79.47 | – | – | – | – |
| Deferred revenue on customer provided assets | 1,021.06 | – | – | – | – |
| Solar Power | 874.01 | – | – | – | – |
| Other Claims | 61.84 | – | – | – | – |
| Total | 2,48,939.25 | – | – | – | – |
Tricky Areas From a Shariah Perspective
Bharat Dynamics Limited (BDL) generates revenue from various sources within its operating segments. Firstly, the company earns income from the sale of missile systems, which includes revenue from designing, developing, and manufacturing a wide array of guided missile systems. This segment encompasses products like surface-to-air missiles, anti-tank guided missiles, anti-ship missiles, and strategic missiles, catering to the defense needs of the Indian Armed Forces and other clients.
In addition to missile systems, BDL manufactures and supplies a diverse range of defense equipment, contributing to its revenue stream. This segment encompasses products such as torpedo countermeasures, underwater weapons, countermeasures dispensing systems, and other defense electronics. The revenue generated from the sale of these defense equipment items further bolsters BDL’s financial performance.
Furthermore, BDL provides essential after-sales services, including maintenance, repair, and overhaul (MRO) services for the defense equipment it supplies. Revenue from service contracts, spare parts sales, and support services constitutes a significant portion of the company’s income, reflecting its commitment to customer satisfaction and long-term client relationships.
BDL invests in research and development (R&D) activities to innovate and improve its missile technologies, enhance existing products, and optimize manufacturing processes. Revenue generated from R&D contracts, government grants, and technology transfers forms a crucial segment of the company’s revenue stream, reflecting its focus on technological advancement and innovation.
Moreover, BDL actively participates in the global defense market, generating revenue from the export sales of missiles, defense equipment, and related services. Export sales play a pivotal role in revenue diversification and contribute to the company’s growth strategy by expanding its market reach beyond domestic borders.
Additionally, BDL may fulfill offset obligations in certain defense contracts by sourcing components, technology, or services from local vendors. Revenue generated from offset contracts and partnerships also adds to the company’s revenue stream, reinforcing its commitment to supporting local industries and fulfilling contractual obligations.
From a Shariah perspective, the revenue streams generated by BDL’s operating segments appear clean and compliant with Shariah principles, reflecting the company’s adherence to ethical and permissible business practices within the defense sector.
Non-operating revenue: (All figures in Laks of INR for the Year ended March 31st, 2023)
| Segments | Revenue | Non-Permissible Revenue | % Non-Permissible Revenue | Non-Permissible Classification | Comments |
| Interest income | 9,758.26 | 9,758.26 | 100 | Interest income | Bank deposits |
| Others | 1,417.91 | 1,417.91 | 100 | Interest income | Interest income on financial assets carried at amortised cost- Loans |
| Fair value gain/(loss) on financial assets measured at Fair value through profit and loss | 130.24 | – | – | – | Equity method |
| Gain on disposal of property, plant and equipment | 10.06 | – | – | – | – |
| Miscellaneous income (net) | 435.18 | – | – | – | – |
| Liquidated Damages recovered from suppliers | 4,306.21 | – | – | – | – |
| Total | 16057.86 | 11,176.17 | – | – | – |
It is clear from the above table that the non-operating income of the company includes interest income which is Shariah not compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification.
Sector Compliance Calculation:
| Total revenue | 264997.11 |
| Non-permissible operating revenue | – |
| Interest income | 11176.76 |
| BNPI Ratio | 0.0421 |
| Sector compliance | Compliant |
Dividend Purification Calculation:
| Total revenue | 264997.11 |
| Non-permissible operating revenue | – |
| Non-permissible non-operating revenue | – |
| Interest Income | 11176.76 |
| Total non-permissible revenue | 11176.76 |
| Dividend Purification Ratio | 0.0421 |
Financial Ratio Screen:
(All figures in INR Crores for the Quarter ended 30th September 2023)
| Particulars | Amount | Remarks |
| Market Cap | 160441.8 | – |
| Total Debt | 44.919 | – |
| Debt Ratio | 0.00027997 | – |
Source: All the above information is based on the website of the company and the latest Annual Report for the period ended March 31st, 2023
Bharat Dynamics Ltd Annual Reports undefined, Bdl Annual Reports | BSE (bseindia.com)
Conclusion
Given the above information, we at Ratings Intelligence believe that Bharat Dynamics Ltd is Shariah Compliant company as per the Shariah screening criteria.
