Is Infosys Stock Halal to invest in? Facts you should know :: 28th December 2023

We have conducted a comprehensive review on Infosys from a Shariah point of view and analysed its sources of income to know whether they are complying with Shariah principles.

Infosys Limited is an Indian multinational information technology company that provides business consulting, information technology and outsourcing services. Infosys provides software development, maintenance and independent validation services to companies in finance, insurance, manufacturing and other domains.

The Group derives revenues primarily from IT services comprising software development and related services, cloud and infrastructure services, maintenance, consulting and package implementation, licensing of software products and platforms across the Group’s core and digital offerings (together called as “software-related services”) and business process management services.

The Group also derives revenues from the sale of products and platforms including Finacle– core banking solution, Edge Suite of products, Panaya platform, Infosys Equinox, Infosys Helix, Infosys Applied AI, Infosys Cortex, Stater digital platform and Infosys McCamish – insurance platform.

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: (In INR Crores)

for the  year ended 31^std March 2023

Segment Breakup

Financial Services:

Financial Services include enterprises in Financial Services and Insurance.

Retail:

Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics.

Communication:

Communication includes enterprises in Communication, Telecom OEM and media.

Life Sciences:

Life Sciences includes enterprises in Life sciences and Healthcare.

Others:

Others include operating segments of businesses in India, Japan and China, Infosys Public Services and other enterprises in Public Services

Tricky Areas from a Shariah perspective:

A key concern voiced by Shariah compliant users is that such tech companies are providing software services to such financial institutions which are interest based. This question was discussed with the Shariah Board in detail. The Shariah board was of the opinion that such software services are provided to the entire bank and is not exclusively to process only interest payment and receipt. Further it was observed that such softwares can also be used by Islamic banks, evidencing a clear compliant alternative usage of the service provided by such tech companies. Hence such tech companies have been classified as Shariah compliant after due review by the Shariah board.

This is the pitfall of screening providers who exclusively depend on automated algorithm based screening. Lets take the case of Infosys Ltd. It discloses that 29.82% (2023) revenue is contributed from Financial services. The screening algorithm would have picked up that more than 5% of revenue is coming from the financial segment and hence would have classified it as non-compliant. A knowledge-based approach entails understanding the actual business model of the company i.e. it is revenue from selling software to Financial segment clients (Which is a permissible activity) and is not a revenue generated from actual Financial activities (which is a non – permissible activity). At Islamicly, we even go further by consulting a reputed board of Shariah scholars and obtaining their view directly so that users get the most rigorously screened results that they can trust.

Based on the above information, it is safe to assume that the business operations of Infosys Ltd., would be Shariah Compliant

Let’s have a look at the non-operating income of the company.

Non-operating revenue of the company:   (In INR Crores)

for the  year ended 31^std March 2023

It is clear from the table above 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:

Dividend Purification Calculation:

Financial Ratio Screen:

(All figures in INR Crores for the Quarter ended 30^th September 2023)

Source: All the above information is based on the website of the company and the latest Quarterly Report for the period ended 30^th September 2023.

Conclusion:

Given the above information, we at Islamicly believe that Infosys Inc. is a Shariah-compliant company as per the Shariah screening criteria.