| Ticker | BDL |
| Company name | Bharat Dynamics Ltd. |
| Shariah Compliance | Not Compliant |
| DP Ratio | 11.73% |
Last Updated: 23 April 2025
Shariah Issues in defense, arms, weapons and aerospace industries
Companies involved in defense, Arms, Weapons, Military and Aerospace industries may have some very significant Shariah compliance issues.
Islamic investors are concerned that companies which are involved in arms, ammunition and warfare industries are, directly or indirectly, likely to support atrocities against humans in general.
The Islamicly Shariah Board is of the view that such industries must be considered Shariah compliant unless there is direct evidence of such illegal usage of their weapons and warfare products. Hence companies deriving revenues from manufacturing or supplying defense equipment, warfare supplies as well as arms and ammunition will be considered Shariah compliant.
The Shariah Board believes defense industries are vital for countries to safeguard and defend themselves against oppressors and to maintain their sovereignty. Hence the end use of such warfare products can have a clear shariah permissible usage. Further, defense and warfare industries are subject to global scrutiny of customers and have strict policies in place to screen out anti state elements to avoid arms being directly sold to such possible non-compliant usage entities.
Shariah Compliance Issues in Bharat Dynamics Ltd.
When examining Bharat Dynamics Ltd’s revenue streams from a Shariah compliance perspective, several complex issues arise. Bharat Dynamics Ltd., as a multinational corporation, has diverse sources of income that include both permissible and potentially non-permissible activities under Islamic law. Here are the key areas to consider:
Finished Goods Segment:
The Finished Goods segment of Bharat Dynamics Ltd. (BDL) produces and supplies fully assembled defense systems, including missiles, launchers, and other advanced weaponry for the Indian Armed Forces. This segment involves the sale of military hardware and systems, which may raise ethical concerns from a Shariah perspective. The involvement in the arms industry can be deemed non-permissible due to the potential harm these products can cause. In the absence of any adverse report on the end usage of their products, the Shariah board believes such revenues will be considered Shariah compliant.
Let’s have a look at the operating segments from which the company derives its revenue and apply the Shariah screens to them:
Segment Breakup: (In lakhs of INR)
For the year ended 31st March 2024
| Segments | Revenue | Non-Permissible Revenue | % of Non-Permissible Revenue | Non-Permissible Segment Classification | Comments |
| Sale of products-Finished Goods | 211,032.08 | – | – | – | Sale of products |
| Spares | 15077.67 | – | – | – | – |
| Miscellaneous | 11.51 | – | – | – | – |
| -LD refunded / (levied) by Customers | -6,144.63 | – | – | – | – |
| Repairs and Overhauls | 8,539.83 | – | – | – | – |
| – Job Works | 6,126.72 | – | – | – | – |
| -Miscellaneous | 495.69 | – | – | – | – |
| -LD refunded / (levied) by Customers | -81.26 | – | – | – | – |
| Sale of Scrap | 255.4 | – | – | – | – |
| Solar Power | 723.78 | – | – | – | – |
| Other Claims | 458.02 | – | – | – | – |
| Interest Income | 31,906.37 | 31,906.37 | 100% | Non-Islamic Finance | Any form of Interest (Riba) is considered to be non-permissible. |
| Total | 236,494.81 | – | – | – | – |
Non-operating revenue: (In lakhs of INR)
For the year ended 31st March 2024
| Segments | Revenue | Non-Permissible Revenue | % Non-Permissible Revenue | Non-Permissible Classification | Comments |
| Other Claims | 61.83 | – | – | – | Misc Income |
| Deferred revenue on customer provided assets | 828.89 | – | – | – | – |
| Net foreign exchange gain | 1,062.58 | – | – | – | – |
| Fair value gain/(loss) on financial assets measured at Fair value through profit and loss | 125.44 | 125.44 | 100% | Non-Islamic Investments | The Company has invested in various Debt securities |
| Total | 4,715.50 | 125.44 | 2.66% | – | – |
It is clear from the above table that the non-operating income of the company includes investment income which is Shariah not compliant. This amount is included for the calculation of the Dividend Purification.
Sector Compliance Calculation:
| Total revenue | 268,401.18 |
| Non-permissible operating revenue | 31,906.37 |
| BNPI Ratio | 11.89% |
| Sector compliance | Not Compliant |
Dividend Purification Calculation:
| Total revenue | 273,116.68 |
| Non-permissible operating revenue | 31,906.37 |
| Non-permissible non-operating revenue | 125.44 |
| Total non-permissible revenue | 32,031.81 |
| Dividend Purification Ratio | 11.73% |
Financial Ratio Screen:
(All figures in INR Crores for the Quarter ended 30th September 2024)
| Particulars | Amount | Remarks |
| Market Cap | 268,242.90 | – |
| Total Debt | 29.473 | – |
| Debt Ratio | 0.011% | – |
Source: All the above information is based on the website of the company and the latest Annual Report for the period ended March 31st, 2024
Conclusion
Given the above information, we at Islamicly believe that Bharat Dynamics Ltd is not a Shariah-compliant company as per the Shariah screening criteria
