Morgan Stanley reiterates positive stance on Reliance Industries after Rolls-Royce pact

Reliance Industries Ltd. announced its strategic intent to partner with British aerospace major Rolls-Royce to develop India's indigenous combat engine for the Advanced Medium Combat Aircraft (AMCA) programme over the weekend.

The company, in an exchange filing post-market hours on Friday, August 14, said the partnership will offer capabilities for the design, development, manufacturing and delivery of the combat engine.

As part of the partnership, both companies will explore the formation of a dedicated aerospace gas turbine complex which will be a centre of excellence for power and propulsion technology in India, Reliance Industries stated.

"Our intent with Rolls-Royce is to combine their world-leading expertise in advanced propulsion with Reliance's technology, manufacturing, scale and execution capabilities to build an indigenous aero-engine ecosystem in India. Together, we aim to build an enduring national capability that can make India self-reliant, and over time, globally competitive in advanced propulsion technologies," Anant Ambani, the executive director of Reliance Industries, said.

Also Read: India can build fighter jets, but not their engines. Can Reliance-Rolls-Royce change that?

Rolls-Royce CEO Turfan Erginbilgic said joining forces with Reliance Industries brings together his company's century-long heritage in advanced engineering and proven engine expertise with the latter's homegrown leadership in Indian industry. "Together, with our existing partnerships and capabilities in India, this marks a major milestone towards building a robust, self-reliant aerospace ecosystem in the country," he said.

Reliance Industries said the aero gas turbine complex will build sovereign, end-to-end Indian capability across design, development, manufacturing, testing, production and through-life support. This will also unlock opportunities to explore wider collaborations across defence, civil aerospace and new power and propulsion systems, it said.

Morgan Stanley

Brokerage firm Morgan Stanley said Reliance Industries is re-imagining its strategic direction again. Manufacturing is getting a fillip, especially in areas where technology and capital are key bottlenecks, the brokerage stated.

The congolomerate has evolved via chemicals in the 1980s , refining in the 2000s, consumer facing vertical in 2010s and manufacturing in 2020s, it said.

Morgan Stanley said the 'Growth in Life' motto of Reliance appears to fit with the spirit of its strategi intent to partner with Rolls-Royce.

Stock reaction

33 out of the 34 analysts who have coverage on Reliance Industries have a "buy" rating on the stock, with one solitary "sell" recommendation.

Shares of Reliance Industries were down 0.1% at ₹1,308 apiece at 9.25 am on Monday. The stock has declined 1.5% in the past month and is down 16.9% this year, so far.

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