today, interest in ethical investing is growing, with many people striving to align their portfolios with their religious and ethical views. For Muslim investors, it is very important to ensure that their investments are in line with Islamic principles.
In this article, we will find out if Bharti Airtel, one of India’s largest telecom companies, is a halal stoc
Halal investing is done according to the principles of Islamic finance, which is inspired by Sharia law. There are some important things to keep in mind
- Avoid prohibited industries
Businesses involving alcohol, gambling, pig-related products and interest-based financial services are considered haram - Pay attention to financial ratios
Excess debt and interest income are not permitted in Islamic finance. Therefore, the financial structure of a company must be examined on certain specific criteri - Ethical business practices
The company’s actions and governance must be ethical and socially responsible
Bharti Airtel Overview
Bharti Airtel is a telecommunications company, apart from India it operates in 18 countries in Asia and Africa. Its services include mobile voice and data, broadband, enterprise solutions and digital television. It is listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) and plays a vital role in India’s digital transformation
Now let’s see whether Bharti Airtel is a Halal stock or not, for this we will use the criteria given above
Fundamentals
| MKT Cap | P/E Ratio | P/B Ratio | Industry P/E | Debt to Equity |
|---|---|---|---|---|
| 9,11,134cr | 74.26 | 10.45 | 64.16 | 2.59 |
| ROE | EPS | Div Yield | Book Value | Face Value |
|---|---|---|---|---|
| 16.32% | 21.54 | 0.51% | 153.07 | 5 |
Industry Analysis
Bharti Airtel provides telecommunications services, which are generally considered halal because they do not engage in prohibited activities such as gambling or alcohol production. The company’s core business of providing connectivity and digital services is in accordance with Islamic principles
Financial Screening
Debt-to-Equity Ratio
Islamic finance discourages excessive reliance on interest-bearing debt. Scholars say that for Shariah compliance, the debt-to-equity ratio should not exceed 33%. According to Bharti Airtel’s financial reports, its debt level is quite high
Interest Income:
Bharti Airtel earns some income from interest-bearing deposits and investments. To make a halal stock, interest income should not exceed 5% of total revenue. It is important to know the exact proportion of interest income in its revenue, which is very difficult to know. For this, get information from Islamic Advisor
Liquidity Ratios
Companies whose liquid assets are more than total assets have to ensure that their liquid assets do not generate interest income. Looking at Bharti Airtel liquidity ratio, it seems that it cannot generate interest income
| Current Ratio | Quick Ratio |
|---|---|
| 00 | 00 |
Ethical Practices and Governance
Bharti Airtel has undertaken several initiatives under corporate social responsibility, such as reducing the digital divide, increasing connectivity in rural areas, and supporting education and healthcare programs
These efforts are considered appropriate in the ethical considerations of Islamic investing. However, the company has a lot of debt, which is not appropriate according to Islamic investing
Conclusion
Bharti Airtel cannot be considered a halal stock, the biggest reason for this is the debt.
Many financial institutions and Shariah advisory boards provide screening services to evaluate the compliance of stocks. Inclusion or exclusion of Bharti Airtel in these lists can be a valuable insight for Muslim investors. Therefore, it would be right to use these resources or take guidance from a qualified Islamic scholar.
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