Mukesh Ambani-led Reliance Industries has entered its fifth monetisation cycle, with artificial intelligence infrastructure and new energy emerging as the company's next major value drivers, according to a Morgan Stanley report that examined the group's evolving capital base and future return profile.The brokerage, with an ‘overweight’ rating and a target price of Rs 1,803, forecasts an upside potential of 34% from current market levels. Morgan Stanley analysts, including Mayank Maheswari, noted that Reliance has invested $168 billion over the past decade, with nearly half of that spending taking place in the latter half of the period. The company has now settled into a new capital deployment phase, utilising around $15 billion of annual operating cash flows while working with a shorter monetisation cycle.Morgan Stanley said "Monetisation 4.0" is already underway as Reliance ramps up module and cell production, advances chemical projects scheduled for completion by 2027 and leverages its land resources to meet more than 15 GW of energy requirements.RIL growth leversGenAI: Morgan Stanley said GenAI represents the next growth frontier for Reliance Industries as the company reconfigures its Jamnagar energy complex to monetise its green energy investments. The brokerage expects new energy and AI infrastructure to emerge as key drivers of value creation, supported by cash flows from existing businesses. It noted that Reliance's 5,50,000-acre land bank in Kutch has the potential to generate 150 billion units of electricity,which could power AI infrastructure, including a 1 GW data centre, as well as a new power-intensive PVC manufacturing facility.Energy storage: Morgan Stanley highlighted Reliance's plans to build an integrated clean energy ecosystem, anchored by its upcoming battery and electrolyser giga-factories. The battery giga-factory, expected to be commissioned from 2026, will initially have an annual capacity of 40 GWh, with the ability to scale up to 100 GWh, supporting round-the-clock renewable energy supply and grid-scale storage. Alongside this, the company is developing an electrolyser giga-factory with capacity scalable to 3 GW per year to support cost-competitive green hydrogen production. Reliance is targeting 3 MMTPA of green hydrogen equivalent capacity by 2032, a move that Morgan Stanley believes could strengthen India's energy security.Falling funding costs: Morgan Stanley noted that Reliance's funding costs improved in FY26, with the consolidated cost of funding declining by around 7 basis points to about 7.2%. The average spread over bond yields stood at 188 basis points, while the standalone cost of debt fell 67 basis points to 6.3%. On the balance sheet front, Reliance had gross debt of $50 billion, excluding spectrum liabilities, at the end of FY26. Consumer retail accounted for 15% of total borrowings. US dollar debt represented 60% of gross debt, while rupee-denominated debt stood at 29% in FY26, down from 42% a year earlier.The company's net debt and liabilities-to-EBITDA ratio stood at 1.3 times at the end of FY26, reflecting a slight sequential improvement. Morgan Stanley added that working capital accounted for 10% of assets, with a large portion expected to be monetised in FY27 as the company moves further into its monetisation phase.Smart human capital allocation: Reliance's workforce increased 4% year-on-year to 4,20,000 employees in FY26. The growth was largely driven by higher employee strength in the retail business despite store rationalisation. Retail now accounts for more than two-thirds of the company's total workforce, while other business segments reported a reduction in headcount during the year.As for risks to upside, Morgan Stanley said a tighter global refining and chemicals market could provide upside to its outlook, particularly if supply-side reforms and anti-involution measures in China support industry fundamentals. The brokerage also sees stronger-than-expected execution in Reliance's new energy business as a potential positive catalyst. On the downside, Morgan Stanley flagged the possibility of a slower recovery in the consumer retail business, especially if Reliance continues to face challenges in improving traction in its fashion segment. It also cautioned that technological shifts in the new energy sector could necessitate higher capital expenditure, increasing investment requirements.(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)