Reliance Industries: The AI-Driven Transformation of Mukesh Ambani’s Business Empire
Billionaire Mukesh Ambani is poised to significantly enhance the market value of Reliance Industries Ltd (RIL), potentially adding up to $60 billion for shareholders through the integration of the company’s new energy business with artificial intelligence (AI), according to a recent report by Morgan Stanley.
Harnessing AI for Value Creation
Global brokerage firm Morgan Stanley believes that RIL stands on the brink of substantial value creation as it reconfigures its expansive Jamnagar energy complex to transform into India’s AI infrastructure backbone. This strategy positions the conglomerate to leverage the burgeoning artificial intelligence sector while tackling the pressing global issue of powering energy-intensive data centers.
The Next Frontier: Generative AI
According to the latest research report, “Gen AI is the next frontier for RIL as it retools the Jamnagar energy complex to monetize its energy production—a significant hurdle globally for Generative AI advancement,” the analysts at Morgan Stanley stated. They foresee potential value creation of up to $60 billion from the new energy vertical, as RIL utilizes electrons to power chemicals, data centers, and refineries.
Ambitious Plans for New Energy
Reliance views its New Energy business as a transformative initiative, way beyond its past operations. The company is currently constructing an AI infrastructure in Jamnagar, which it aims to operationalize within two years. This includes a strategic plan to power 1GW of data center capacity utilizing NVIDIA’s innovative Blackwell chips.
Data Center Requirements
Morgan Stanley estimates that a 1GW data center facility would necessitate approximately 678,000 B100 chips. If Reliance allocates around 200MW for its internal use, it would require roughly 135,000 B100 chips. Scaling up—a process generally taking 4 to 5 years—1GW of data center capacity would demand around 1.3GW of continuous power.
Capitalizing on AI-Charging Trends
During its Q3 FY25 earnings call, Reliance shared strategic insights, detailing its efforts to tap into AI adoption trends by establishing a national AI infrastructure. The company is prioritizing the “large-scale internal adoption of AI” and actively embedding AI across all its processes.
Market Momentum Building
Shares of RIL have delivered an impressive 26% surge this calendar year, reflecting increasing investor confidence in Ambani’s transformative strategy. Morgan Stanley maintains an overweight rating on RIL, setting a price target of Rs 1,617 per share and anticipating a 14% earnings CAGR over the fiscal years 2025 to 2028.
Investor Sentiment on AI Investments
While investor focus on RIL’s Generative AI investments remains limited, the brokerage pointed out that other energy and power players globally have experienced valuations driven by the promises of Generative AI before realizing earnings. Morgan Stanley’s evaluation of RIL’s new energy business employs a Price-to-Book multiple of 3x, factoring in allocations for solar supply chain development, battery capacity expansion, and progress in green hydrogen capacity.
Future Earnings and Valuation Scenarios
In bullish scenarios, Morgan Stanley’s valuation for RIL’s new energy ventures could reach Rs 2,034, but there’s a conservative bear case of Rs 1,210.
Near-Term Earnings Catalyst
The upcoming Q1 earnings announcement might provide immediate momentum, supported by strong global fuel margins, despite some refinery maintenance. Retail revenue growth is expected to be approximately 17% year-on-year, with stable quarter-on-quarter margins.
Telecom Growth Prospects
In telecommunications, RIL is expected to report around 6.5 million net subscriber additions quarter-on-quarter, with a slight uptick in Average Revenue Per User (ARPU). Overall, consolidated EBITDA is projected to rise by 16% year-on-year, with consolidated earnings anticipated to surge by 27%.
Impact of Global Market Trends
Morgan Stanley noted that global pricing for solar panels has stabilized, with major players facing free cash flow constraints in 2024. This trend, along with increased capex and pricing discipline across the supply chain, positions RIL favorably. The anticipated results in the upcoming June 2025 quarter are expected to bolster investor confidence in earnings delivery across refining, chemicals, and retail sectors.
Driving Sustainable Growth
With a comprehensive growth strategy in place, Morgan Stanley predicts a 14% earnings CAGR will be bolstered by improved O2C margins due to lower feedstock prices and robust domestic demand, in addition to strong traction in consumer brands facilitating retail growth, and tariff hikes in telecom.
Conclusion
Reliance Industries Ltd’s integration of AI within its new energy business illustrates a forward-thinking approach that seeks to not only enhance shareholder value but to establish a pivotal role in India’s technological landscape. Through strategic investments and innovations, Mukesh Ambani’s vision for the future aims to harness the potential of AI to combat pressing global energy challenges.
Questions and Answers
- 1. What potential market value increase is anticipated for Reliance Industries Ltd?
- Reliance Industries Ltd could see an increase of up to $60 billion in market value through the integration of its new energy and AI business.
- 2. What is the focus of Reliance’s New Energy business?
- Reliance’s New Energy business is centered on creating an AI infrastructure and addressing global energy demands, particularly for data centers.
- 3. How many B100 chips does a 1GW data center require?
- A 1GW data center facility would require approximately 678,000 B100 chips.
- 4. What is Morgan Stanley’s price target for RIL shares?
- Morgan Stanley has set a price target of Rs 1,617 per share for Reliance Industries Ltd.
- 5. What growth rate is expected for RIL’s consolidated earnings?
- Consolidated earnings are projected to surge by 27% year-on-year in the upcoming financial reports.
