Reliance's $110 bn AI investments seen back-loaded over seven yrs

New Delhi (PTI): Reliance Industries Ltd (RIL) has pivoted its business model roughly every decade during its nearly 48-year listed history. Its plan to invest USD 110 billion over seven years in artificial intelligence (AI), related energy supply and the digital ecosystem marks its next major capital allocation shift, analysts said.

The proposed AI investment is comparable in scale to the company's telecom and consumer investments between 2014 and 2021, brokerage Morgan Stanley said in a report.

Reliance chairman and managing director Mukesh Ambani had at the India AI Impact Summit last week announced a Rs 10 lakh crore (about USD 110 billion) investment in artificial intelligence over the next seven years, pledging to do with AI what his group had achieved with making mobile and internet data affordable and accessible across India.

The company is expected to adopt a partnership-led approach as it builds out capacity, Morgan Stanley said.

With an annual operating cash flow of USD 14-15 billion and ongoing investment commitments, it is estimated that USD 4-5 billion per year may need to be funded through asset monetisation, such as telecom fibre, to maintain free cash flow breakeven.

The planned USD 110 billion outlay is expected to span multi-gigawatt data centres, 10 GW of renewable energy infrastructure, energy storage systems and AI chip investments.

"We estimate the intelligence business will deliver 12 per cent+ post tax ROCE, i.e 2x above its consumer/telco investments over the past decade," it said, adding that Reliance is set to commission 120 MW of capacity in the second half of FY26 and, in line with global peers, is likely to scale up over five years, suggesting a back-loaded investment cycle.

"So, investments do look more back-loaded," it said.

Estimates indicate that the new intelligence business could generate post-tax return on capital employed (ROCE) of over 12 per cent - roughly twice the level achieved by its consumer and telecom investments over the past decade.

For the first 1 GW currently under construction, AI infrastructure investments excluding energy are pegged at USD 12-15 billion, pending further details from the company.

India's expanding AI infrastructure opportunity and the convergence of energy and digital markets could position Reliance strongly as investments ramp up. Partnerships with Meta Platforms and Google are also expected to help lower capital outlay as the company scales its AI offerings.

"While RIL has given limited detail on its AI plans, our bottom-up work using estimates from around the world does point to 12 per cent ROCE and 18 per cent return on equity (ROE) for RIL's AI infrastructure investments over the next five years," Morgan Stanley said in the report.

India is catching up with the world on AI infrastructure, and the diffusion of energy and AI markets is set to make Reliance stand out as it ramps up its investments. Its partnerships with META and Google should also help lower capital outlay as it scales its AI offering, it added.