Refining, Jio, and retail to drive RIL’s re-rating, says Morgan Stanley

Global brokerage Morgan Stanley has upgraded its outlook on Reliance Industries Ltd (RIL) , citing the company’s “fourth monetisation cycle” and a strong turnaround in cash flows across its key business segments.

In its report titled “Monetisation 4.0” , the brokerage highlighted that RIL has invested over US$80 billion since Covid-19 , and these investments are now poised to pay dividends . For the first time, energy, consumer, and telecom businesses are expected to turn free-cash-flow (FCF) positive simultaneously , a structural trigger that could lead to a significant revaluation of the company in 2026 . Historically, RIL has outperformed the Sensex during similar cycles, gaining nearly 35 percentage points in the last two monetisation phases between 2017-2019 and 2020-2021.

A key driver behind the re-rating is RIL’s refining business , described as its most underappreciated vertical. Fuel refining margins are currently tracking near US$14 per barrel, about 1.5 times above mid-cycle levels, marking what the report calls a golden age for refining , expected to continue into 2026. This phase could generate US$7-10 billion in net asset value (NAV).

Telecom is another major pillar, with Jio turning into a cash-generating business as capital intensity declines. Morgan Stanley expects average revenue per user (ARPU) to grow at 9% compound annual growth rate (CAGR) during FY26-FY28, driven by broadband growth, 4G-to-5G upgrades, and AI-led offerings such as Gemini 3 AI.

Retail growth and a chemicals recovery are expected to act as sequential catalysts through FY26. The brokerage anticipates quarterly re-rating and earnings upgrades: refining in Q1, telecom and retail in Q2, new energy ramp-up in Q3, and improved chemical sentiment in Q4. Factors such as capacity shutdowns in China point to the bottom of the petrochemical cycle.

Morgan Stanley also flagged potential upside from new growth areas, with RIL deploying surplus cash into AI infrastructure, energy storage, and polysilicon. Support from US hyperscalers for RIL’s AI data center capacity could enhance confidence in value creation.

Summing up, the report highlighted that investments are now starting to bear fruit , with three strong building blocks, US$50 billion in value creation, and quarterly catalysts making 2026 a promising year for RIL. The brokerage raised its price target to Rs 1,847 and urged investors to participate in this fourth monetisation cycle.