People invest in the stock market. It is important for many people to understand whether their investment is in accordance with the rules of Islamic Sharia or not
In this blog we will learn about a big Indian IT company, Tata Consultancy Services (TCS), and try to understand whether it is a Halal stock.
Shariah-compliant or halal stock is one that is permissible according to Islamic principles. Some important factors have to be taken into consideration in this
- Business Activity
The company’s core business should be halal, such as staying away from haram industries (alcohol, gambling, interest-based banking). - Financial Ratios
The company’s debt and interest-based income should be within limits
Business Activity Analysis of TCS
TCS is an IT services company that provides services such as software development, cloud computing, and digital transformation
Its core business is technology and IT services, which can be considered halal shares as per Shariah rules. It is also important to know how much debt the company has and what is the interest income ratio
Performance
| Market Cap | P/E Ratio | P/B Ratio | Industry P/E | Debt to Equity |
|---|---|---|---|---|
| 1618588Cr | 34.12 | 15.98 | 35.44 | 0.09 |
| ROE | EPS | Div Yield | Book Vlue | face Value |
|---|---|---|---|---|
| 46.74% | 131.12 | 1.65% | 279.87 | 1 |
Analysis of TCS financial ratios
Some financial parameters are important to look at for Shariah-compliant stocks
TCS’s financials are viewed from an Islamic perspective, we have to pay attention to these things
TCS’s debt-to-equity ratio is generally low, which is necessary for halal stocks.
TCS invests its surplus funds in fixed deposits and other interest income, which can be a concern
But its percentage is very low compared to the company’s total revenue
Is Dividend Income Halal or not?
TCS gives dividend to investors from its income, but if some of the company’s income comes from haram sources, then investors have to purify the proportionate part of their dividend.
This means that you will have to donate that part of your dividend which has come from haram incomes
Expert Opinions
According to Shariah scholars, if the primary business of the company is in order and financial ratios are within acceptable limits, then it is worth investing in it.
TCS’s business and financial ratios appear mostly acceptable, but its outcome depends on the analysis of every investor
Final decision
TCS’s business activity is halal and its debt-to-equity ratio also looks fine. But some people avoid it because of the interest income and dividend netting.
If you are fully committed to Shariah-compliant investing, you should consult your experts and do your own analysis
Disclaimer
It is very difficult to know whether any stock is completely halal
This article is only for educational purpose and it is not financial or religious advice. Every investor should consult his financial advisor or Islamic scholar.
What is your view? Do you invest in TCS? Do tell us in the comments!
