In case of finance companies, more debt does mean a better ROE (return on equity), but obviously there is a safe limit. Leverage ratios of below 10% are typically safe. Banks such as ICICI, YES, Axis etc have leverage ratios around 7%,8%,9% etc.
Jan 12 2013 10:38 AM
Another important criteria to analyse banks is NPA's (non-performing assets). Even with a safe leverage ratio, NPA's couls destroy a balance sheet in just 1 financial year. NPA levels greater than 7% are deemed risky.