Reliance Industries creates $100 billion in wealth

 Reliance Industries Ltd, supported by Mukesh Ambani, could see its market value grow by as much as USD 100 billion in its fourth monetization phase of the century as new revenue streams appear and valuation multiples improve.

Over the past almost thirty years, the conglomerate's transformation cycles have resulted in a 2-3 times increase in wealth for investors, with each decade adding at least $60 billion to its market value. RIL is currently in its fourth cycle of generating revenue in this century.

Morgan Stanley, the brokerage firm, mentioned a target price of Rs 3,540 in the base case scenario.

The 4th cycle of monetization by RIL

The brokerage stated that Monetization 4.0 is distinct as it is backed by the business upcycle, domestic demand, and reduced competition. RIL's fourth round of monetization (since 1997) is expected to boost the year-to-date market capitalization by an estimated USD 100 billion to USD 60 billion.

RIL has achieved success due to its growing market share, smooth integration, and consistently surpassing investor expectations whenever it redefined its business. This monetization follows RIL's investment of $60 billion between 2021-2023, the shortest investment period since the 1990s.

Investing in alternative energy sources, expanding retail operations to gain market share from informal businesses, and transforming current energy companies provide a long window for sustained profit growth, potentially extending beyond the next three years as long as ROCE stays above 10%.

Revenue of RIL is expected to increase by 12%

Morgan Stanley anticipated a 12% compound annual growth rate for the company's earnings from all sectors during FY24-26. It was stated that RIL's return on equity (ROE) is expected to surpass the cost of capital in the future as the company shifts towards a more lucrative, enduring, and less dependent on economic cycles growth strategy driven by alterations in business operations and capital makeup.

It increased its earnings valuations by 0.5-1.0x to account for this monetization as RIL matches the performance of both domestic and global competitors who have experienced a 30% increase in earnings valuations over the last year.

The brokerage noted changes in recent telecom tariff hikes, oil prices, and refining margins. They increased their EPS estimates slightly for 2025, by 7% for 2026, and by 8% for 2027.