Reliance Jio, India's largest telecom operator, is going to become a cash cow for Reliance Industries Limited (RIL) in the near future. RIL is the largest Indian company in terms of market cap, and it is now entering its fourth monetisation cycle, as per a recent rreport from Morgan Stanley. The company will see its telecom entity, Jio Platforms turning into a cash cow and becoming FCF (free cash flow) positive for the first time. This will trigger a re-rating for Reliance Industries in the near future.
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The telco's growth will be driven by the reduce capex (capital expenditure) levels, 9% CAGR growth for average revenue per user (ARPU), and subscriber growth outpacing the industry. According to Morgan Stanley, Jio should start moving towards free cash flow trajectory by the end of FY26.
It is worth noting that Jio will also go for IPO (Initial Public Offering) in the first half of 2026. According to the analysts at Morgan Stanley, the EBITDA of Jio will rise from Rs 603 billion (FY25) to Rs 986 billion (FY28e). The tariff hikes will fuel the ARPU of the company and 5G penetration across the country. The telco is also the largest player in the home broadband space, and is growing at a rapid pace quarter after quarter.
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Jio's ROCE (return on capital employed) still remains at a meagre 7%, but is expected to improve as spectrum assets are still in the intial stage of monetisation. The next round of tariff hikes by the Indian telecom operators is expected in the second half of 2026, and will boost the industry ARPU as well as the free cash flow for the telcos. It would help Jio and Reliance in boosting growth and also enable Airtel in reaching the ARPU figure of Rs 300 faster.
