Global investment banking firm Morgan Stanley has said that Reliance Industries is on a path toward a $20 billion+ Ebitda run rate inflection, which could be supported by five major factors. Besides the firm’s new energy business could add $50 billion in market cap in 2022.

First and foremost, refinery margins could nearly double and be sustained at high levels for the next half decade, with global fuel markets seeing sustained lower supply due to a lack of investments.

The global firm sees telecom average revenue per user (ARPU) rising, quality of subscribers improving and churn falling and Reliance guided for normalisation ahead as one recharge cycle is behind.

Thereafter, the global gas market could tighten further as producer discipline remains with rising domestic gas production.

Rising traction on digital commerce with 193 million subscribers and consistent 20 per cent revenue contribution would expand margins.

Lastly, superior petrochemical spreads in olefin and PVC as global cost curves are uplifted, and supply should add to unwinding.

“Investors appear highly sceptical, especially on sustainability of the energy upcycle and potential demand destruction, but we see enough buffers on demand/global inventories along with supply discipline to drive multi-year outperformance,” the global investment firm said in a report.

Indian tycoon Mukesh Ambani’s Reliance Industries spent almost $1bn in the first quarter of this year on investments in renewable energy, fashion and ecommerce companies as the conglomerate works to diversify away from fossil fuels.

India’s largest listed company is increasingly relying on acquisitions to fuel its expansion and take on Gautam Adani, an industrialist with one of the country’s largest renewables portfolios. It is also fending off challenges from Amazon and Walmart-owned Flipkart in the retail sector.

Reliance’s dealmaking in the first quarter of the year hit a three-year high at 10 deals, according to data from Refinitiv. Two of those deals, worth about $330mn combined, were to strengthen Reliance Retail’s ecommerce platform, with investments in delivery start-up Dunzo and robotics company Addverb, which is expected to help Reliance automate its warehouses.

Reliance Industries on Friday announced annual revenues of $102 billion, a record for an Indian company. In the quarter ended March, it posted net profit attributable to company owners of Rs162 billion ($2.1 billion), a 22.5 per cent rise over the same period last year that still missed analyst forecasts.

“Traditionally, Reliance has always relied on building up scale and expertise in-house,” said Probal Sen, research analyst at ICICI Securities.

“That’s been a significant change of strategy over the last three-four years, where they have been more than happy to acquire capabilities, technologies or infrastructure that they themselves don’t have.”

Sen added that Reliance could finance huge bets on technology thanks to its triple B plus credit score — better than India’s sovereign rating of triple B minus. He said Ambani enjoys “absolute carte blanche” from investors “not really paying attention to return ratios in the short term”.

The group’s biggest investments last year came from Reliance Industries, home to the oil and petrochemicals unit that traditionally drove the conglomerate’s profits. Last June, it launched an ambitious $10bn investment scheme to diversify away from fossil fuels.

Ambani said Reliance was planning to build four giga factories across 5,000 acres at its Jamnagar refinery complex in Gujarat to make solar panels, batteries for energy storage, electrolysers to produce hydrogen and fuel cells to convert it. These are supposed to help offset emissions from its fossil fuel business, after Reliance pledged in 2020 to become “net carbon zero” by 2035.

Sodium-ion battery designer and maker Faradion was one of Reliance Industries’ biggest 2021 acquisitions, at 100 million pound, plus 25 million pound in investment.

Reliance intends to use UK-based Faradion’s technology at its factory for batteries to store energy, with the goal of manufacturing batteries for use in vehicles.

Faradion had not initially sought a buyout. “We were more running a fundraising or investment process, and then from there [Reliance] seduced my investors with an attractive offer,” said James Quinn, Faradion’s chief executive. Reliance “moved very, very quick,” recalled Quinn. “I think from term sheet to signing was about 45 days.”

The deal made sense for both sides, said Quinn. “What Faradion does really well is innovate and advance the technology. What Reliance can do really well is large-scale industrialisation, building very big factories and doing it cost effectively.”