Financial Leverage Practice of Indian Telecommunications Ltd.: Bane or Boon

Financial leverage measures firm’s ability to use debt for shareholders’ benefit. A high degree of financial leverage maximizes shareholders’ return, but it also exposes them to a higher risk. It is beneficial only when the return on assets is higher than the fixed financial costs. The telecommunication sector is a low-leveraged sector. The present case explores the effect of financial leverage on shareholders’ return of Indian Communications Ltd., a leading telecommunication company in India.