| Ticker | PARAS IN |
| Company Name | Paras Defence and Space Technologies Ltd |
| Shariah Compliance | Compliant |
| DP Ratio | 2.23% |
Report Published as on 11th July 2024
We have conducted a comprehensive review on Paras Defence and Space Technologies Ltd from a Shariah point of view and analyzed its sources of income to know whether they are complying with Shariah principles.
Paras Defence and Space Technologies Ltd is a leading private sector company in India involved in designing, developing, manufacturing, and testing a wide variety of defence and space engineering products and solutions. They are one of the frontrunners in the “Indigenously Designed Developed and Manufactured” (IDDM) category within the Indian private sector.
They are known for their exceptional contributions to many prestigious Defence & Space Programs of India. They are the only company in India that manufactures Infrared Optics in large quantities.
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 Lacs of INR for the Year ended 31st March 2023
| Segments | Revenue | Non -Permissible Revenue | % of Non-Permissible Revenue | Non -Permissible Segment Classification | Comments |
| Heavy Engineering | 6,882.31 | – | – | – | – |
| Defence & Space optics | 7,135.72 | – | – | – | – |
| Defence Electronics | 8,224.56 | – | – | – | – |
| Total | 22,242.59 | – | – | – | – |
Segment Breakup
The company derive its operating revenue from following segments:
- Heavy Engineering
- Defence & Space optics
- Defence Electronics
Heavy Engineering:
This segment is engaged in manufacturing and sale of Flow Formed Rockets/ Missile Motor Tubes, Submarine periscope, Electromechanical assemblies and Turnkey projects. They specialize in manufacturing high performance, precision mechanical systems for critical defence applications.
Defence & Space optics:
This segment comprises of manufacturing and sale of Infra-Red Lenses for Night Vision Devices, Space Optics/Gratings/Mirrors, optical Domes, Gyroscope components, integrated opto-mechanical Assemblies and Precision Diamond Turned components.
Defence Electronics:
This segment comprises of Defence Automation & Control systems, Rugged Command & Control Consoles, Military grade communication system, non-contact proximity sensor and Electro-Magnetic Pulse (EMP) Protection Solutions. They offer a wide range of high-performance computing and electronic systems for defence applications, including sub-systems for missiles, tanks and naval applications.
Tricky Areas From a Shariah Perspective
Looking into their revenue streams, the tricky areas that can be observed from a Shariah perspective are:
The company seems to be generating revenue from sales of electronic products. This includes any revenue generated from the sales of Rocket/Missile systems, space research systems, Naval systems, Battle tank and Armored vehicles, electronic warfare and Surveillance systems and electromagnetic shields.
They provide various solutions including defense and space hardware, electro-optics, homeland security, and electronic warfare systems. The company is known for its expertise in designing, developing, and manufacturing defense and space electronics for both domestic and international markets. Almost all the products are used for defence.
Since the Company in question is purely into the provision of electronics devices for defence and space, NO BNPI was found from their operating revenue for S & P criteria. Based on the above information, it is safe to assume that the business operations of Paras Defence and Space Technologies Ltd, would be Shariah Compliant.
Let’s have a look at the non-operating revenue of the company.
Non-operating revenue:
All figures in Lacs of INR for the Year ended 31st March 2023
| Segments | Revenue | Non-Permissible Revenue | % of Non-Permissible Revenue | Non-Permissible Segment Classification | Comments |
| Interest Income | 292.54 | 292.54 | 100 | Interest income | – |
| Rent Income | 51.56 | – | – | – | – |
| Export Incentives | 32.45 | – | – | – | – |
| Dividend Income | 0.70 | – | – | – | – |
| Gain on Financial Instruments | 442.30 | 221.15 | 50% | Loans& security deposits | Includes gain from equity, loans and security deposits. |
| Miscellaneous Income | 2.88 | – | – | – | – |
| Total | 822.43 | 513.69 | 62.46% | – | – |
It is clear from the table above that the non-operating income of the company includes interest income and gain on financial instruments, which is Shariah not compliant. This amount is included for the calculation of the Sector Compliance and Dividend Purification.
Sector Compliance Calculation:
| Total revenue | 23,065.02 |
| Non-permissible operating revenue | 0 |
| Interest income | 292.54 |
| % of non-permissible revenue | 1.27% |
| Sector compliance | PASS |
Dividend Purification Calculation:
| Revenue Description | Non-Permissible Revenue |
| Non-permissible operating revenue | 0 |
| Non-permissible non-operating revenue | 513.69 |
| Total non-permissible revenue | 513.69 |
| Total revenue of the company | 23,065.02 |
| Dividend Purification Ratio | 2.23% |
Financial Ratio Screen:
| Particulars | Amount | Remarks |
| 3 Years average Market | 25761.97 | – |
| Total Debt | 395.9 | – |
| Debt Ratio | 1.54% | – |
Source: All the above information is based on the website of the company and the latest Annual Report for the period ended 31st March 2023.
https://www.bseindia.com/xml-data/corpfiling/AttachHis//034461c5-da70-4d4e-9ac7-086c3349412d.pdf
Conclusion
Given the above information, we at Ratings Intelligence believe that Paras Defence and Space Technologies Ltd is Shariah Compliant company as per the Shariah screening criteria.
