Morgan Stanley has raised its price target on Reliance Industries to Rs 1,847 from Rs 1,701, betting big on improving prospects in 2026.
The brokerage house believes that FY26 will mark the point where years of heavy spending finally convert into sustained cash generation across the company’s core businesses.
Morgan Stanley on RIL: Why is 2026 set to be a breakout year
In a research note dated December 16, 2025, the brokerage said Reliance is entering what it calls its fourth monetisation cycle, a phase in which refining, chemicals, telecom and retail are all expected to generate free cash flow at the same time, something the company has not achieved in the last three decades. Reliance share price closed at around Rs 1545, implying nearly 20% upside to Morgan Stanley’s revised target.
At current prices, the report says the market is still assuming mid-cycle refining margins, conservative retail growth and limited value for AI-led infrastructure.
Morgan Stanley on Reliance Industries: After massive spending, the cash phase begins
According to Morgan Stanley, Reliance has invested over $80 billion, or roughly Rs 6.6 lakh crore, since the Covid period across refining upgrades, petrochemicals, 5G telecom, retail expansion, digital platforms and new energy projects.
These investments weighed on returns, cash flows and valuation for several years as capital work-in-progress stayed elevated. That phase, the brokerage argues, is now ending.
From FY26 onward, Morgan Stanley expects capital intensity to fall, operating assets to ramp up, and consolidated return on capital employed to rise by more than 200 basis points, even as net leverage declines steadily.
The key difference this time is that Reliance is not monetising by selling assets, but by recycling surplus cash internally into newer growth areas.
Morgan Stanley on Reliance Industries: Refining emerges as the biggest near-term profit driver
The strongest part of Morgan Stanley’s upgrade rests on refining, a business the brokerage says the market continues to underestimate.
The report points to a global refining cycle where demand growth is running ahead of new capacity additions. Global fuel demand is expected to rise by nearly 2 million barrels per day over the next three years, while new capacity growth remains below 1 million barrels per day, tightening supply conditions.
For Reliance, this has translated into gross refining margins close to $14 per barrel, including fuel retail, nearly 1.5 times above mid-cycle levels.
Morgan Stanley estimates this phase could add $7–10 billion, or Rs 58,000–83,000 crore, to Reliance’s net asset value and flagged 5–7% upside risk to FY27–FY28 earnings if the cycle stays stronger for longer.
Morgan Stanley on Reliance Industries: Jio turns from a spending story into a cash generator
Telecom is expected to add another leg to cash flows. Morgan Stanley said Reliance Jio is set to turn free-cash-flow positive for the first time, as capital expenditure drops sharply after the 5G rollout.
The brokerage expects average revenue per user (ARPU) to grow at around 9% CAGR between FY26 and FY28, driven by higher-quality subscribers, rising broadband penetration and migration to higher-priced 5G plans.
Morgan Stanley compared this phase to Bharti Airtel’s recent turnaround, where improving returns and falling capital intensity led to a sharp re-rating in valuation multiples.
Morgan Stanley on Reliance Industries: Retail growth set to re-accelerate
Reliance Retail, which faced investor scepticism after slower growth and store closures, is expected to regain momentum, according to the report.
Morgan Stanley noted that store rationalisation is largely complete and that Reliance’s consumer brands business has scaled rapidly, reaching revenue levels comparable to ITC’s FMCG business within three years of launch.
The brokerage also highlighted strong traction in quick commerce, with JioMart recording 42% quarter-on-quarter growth in the September 2025 quarter. As a result, retail revenue growth is expected to return to around 17% CAGR between FY25 and FY28, with improving margins as private labels scale up.
Morgan Stanley on Reliance Industries: Chemicals cycle shows signs of a bottom
The chemicals business, which saw margins fall sharply over the last two years, is expected to recover gradually. Morgan Stanley pointed to China’s “anti-involution” drive, which has led to shutdowns of inefficient capacity, alongside slower global capacity additions. Nearly 15 million tonnes per annum of global olefin capacity is no longer operational, tightening supply conditions.
The brokerage expects chemical margins to rise by 10–15% by the end of FY26, helped by higher use of cheaper US ethane feedstock and expansion in PVC capacity for the Indian market.
Morgan Stanley on Reliance Industries: AI data centres add long-term optional value
Morgan Stanley has also put numbers to Reliance’s push into AI infrastructure.
The report estimates that building 1 gigawatt of AI data centre capacity would require an investment of $12–15 billion, with Reliance adopting a GPU-as-a-service model. Based on its assumptions, such projects could generate 11–12% return on capital employed and ROE of around 16%. While disclosures remain limited, the brokerage values the AI business under “RIL Intelligence” at at least 2 times forward book value, in line with global data centre peers.
Morgan Stanley on Reliance Industries: The year ahead
Morgan Stanley expects multiple triggers through FY26, beginning with a refining upcycle, followed by ARPU growth in telecom, retail revenue recovery, and improving confidence in chemicals by the end of the year. The brokerage forecasts 12% earnings CAGR between FY25 and FY28, along with rising returns and falling debt. This means that after years of building capacity, FY26 could be the point when Reliance starts returning cash in a way markets cannot ignore.