RIL's Market Value to Increase by $100 Billion: Morgan Stanley

Brokerage Morgan Stanley stated that Reliance Industries Ltd could potentially increase its market capitalization by as much as $100 billion during its fourth monetisation cycle, driven by new cash flow streams and enhanced valuation multiples. At 12.37 pm IST, shares of RIL were trading marginally higher at ₹3,135.55 on the NSE. 

Over the past three decades, Reliance Industries Ltd (RIL) has delivered 2-3x returns for shareholders, with each decade contributing over $60 billion in market value.

Based on these projections, Morgan Stanley, which has an 'overweight' rating on Reliance Industries Ltd (RIL), has increased its target price for the stock by over 16% to ₹3,540. This indicates a potential upside of around 13.5% from the previous closing price. 

Morgan Stanley believes that RIL's fourth monetisation cycle will be driven by several key factors: telecom tariff hikes, revenue from its new energy business, an upcycle in chemicals, and the back-end integration of its retail business. This marks a significant shift from previous cycles, which heavily relied on oil and petrochemicals, indicating a strategic move towards the consumer and technology sectors. 

"RIL has been a 'show me' story for the past decade and has seen significant market cap inflection once new revenue streams such as new energy, higher telecom tariffs and chemical margins have been delivered," Morgan Stanley stated.

Accordingly, the brokerage has forecasted a 12% compounded annual growth in RIL’s earnings per share between FY24 and FY27. This growth is expected to be driven by the company's investments in new energy and retail expansion, which will help capture market share from the unorganised sector.

Furthermore, Morgan Stanley has marginally raised its FY25 earnings-per-stock (EPS) estimates for RIL, by 7% for FY26 and by 8% for FY27. These adjustments factor in recent telecom tariff hikes, higher oil prices, and improved refining margins.

Morgan Stanley also noted that RIL’s valuation multiples have varied across past investment cycles. The company's return on equity (RoE) is expected to surpass the cost of capital as it transitions to a more profitable, sustainable, and less cyclical growth model, driven by changes in both its business and capital structure.