Mukesh Ambani’s Reliance Industries Ltd (RIL) is on a roll. With revenues of Rs 4.30 lakh crore, a net profit of Rs 36,075 crore and a market capitalisation of Rs 6.18 lakh crore, RIL has achieved a self-sustaining scale. India’s largest company by revenues is spewing cash and had Rs 78,063 crore on its book as on March 31, 2018. The company’s share price has doubled in the last two years, and stood at Rs 976.50 per share on the BSE on July 6.

But the conglomerate’s chairman and India’s richest billionaire, 61-year-old Ambani, has been around long enough to know that there is no place for complacency in business, and that an organisation needs to constantly evolve.

A Morgan Stanley report dated July 5, issued after RIL’s annual general meeting (AGM) held earlier the same day in Mumbai, sums up the company’s future strategy. “Oil to chemicals integration, upgrading all fuels, recycling (plastic), integrating Jio and offline retail stores, venturing into gas marketing, transition to being a technology platform company… all these phrases in Reliance’s AGM point to an effort to future-proof its growth trajectory,” the report says.

Ambani is acutely aware that amid environmental concerns, the world is increasingly moving towards a future that will be less dependent on oil, petroleum products and plastics; two commodities that are the mainstay of RIL’s business at present, which account for almost 74% of the company’s earnings before interest, tax, depreciation and amortiaation (EBITDA) of Rs 74,184 crore in FY18.

Relatively newer businesses such as retail and telecom are gradually gaining scale. Ambani said at the AGM that in RIL’s “golden decade”, which begins in FY19, that the company’s consumer businesses (retail and telecom) will contribute as much to the overall earnings of the company as its energy and petrochemicals businesses. The importance of these new consumer-facing businesses, which have started contributing to the operating profits of the company, becomes more significant when seen in conjunction with Ambani’s aim to “more than double” RIL’s revenues by 2025.

RIL, which was founded by Ambani’s father Dhirubhai Ambani, and was listed in 1977, recently completed the largest capital expenditure programme in the company’s history by investing Rs 3.30 lakh crore across businesses such as refining, petrochemicals, retail, and telecom. A bulk of this expenditure, around Rs 2.50 lakh crore, was dedicated to Reliance Jio for the creation of an exhaustive digital network to offer low-cost, high-speed mobile and broad bank connectivity to customers.

With most of this new capacity creation now in place, it is time for RIL to sweat these assets and churn more cash than before. The Morgan Stanley report expects the company’s return on capital employed to rise as it increases capacity utilisation for its energy assets (which are already operating at over 100% of nameplate capacity), and telecom. “Even after serving the needs of our 215 million customers, the capacity utilisation of the Jio network is less than 20%, which means, we can multiply our customer base without additional investment, Ambani pointed out during his AGM speech.

Indeed, RIL will hope for Jio’s capacity utilisation to increase as much and as quickly as possible, since it has financed this expansion with a significant quantum of debt, which sits on its books, and will have to be repaid eventually. The company had an outstanding debt of Rs 2.18 lakh crore as on March 31, 2018. Adjusted for the cash on its books, RIL’s net indebtedness stood at Rs 1.40 lakh crore. In the short term, it appears that RIL intends to raise further debt funding to re-finance some of its loans that are nearing maturity, thus buying time for Jio to stabilise and start returning cash, and the new projects in the refining-cum-petrochemicals complex to bear fruit.

Towards that end, Jio is leaving no stone unturned in deepening its reach, even if it means course correction. Take the JioPhone, for instance. It has now emerged that JioPhone hasn’t seen the kind of adoption that Jio would have hoped for. According to a CLSA report dated July 5, since its launch in August 2017, Reliance Jio’s feature phone added 25 million subscribers, which is weak compared to the total feature phone sales of 10-12 million a month in this period. Consequently, Jio has slashed the cost of the JioPhone from Rs 1,500 (which was a refundable security deposit for the phone) to Rs 501 (after exchanging an existing feature phone). Jio has also included tailor-made versions of WhatsApp, Facebook, and YouTube in new JioPhones to be sold in the market. The upcoming price cut in the JioPhone will expand the addressable market for Reliance Jio’s feature phone to 90% of the feature phone device market, and so Ambani has set his team a target of selling 100 million JioPhones in the shortest possible time.

The individual announcements that Ambani made at the AGM and the collective picture they present also point towards an interesting shift in strategy for RIL. Under Dhirubhai’s leadership, RIL became the behemoth that it is by following a model of backward, upstream integration. So after starting out as a textile-manufactuer, RIL entered the polymers business, then petrochemicals, then oil refining and finally crude production. This ensured RIL benefited from economies of scale and also managed to secure its own raw material requirements without external dependency.

The thinking at present appears to be the reverse: Downstream integration with newer and higher margin businesses. The energy business will integrate with niche chemicals; mobile telephony will align with broadband; and the overall digital platform will combine with RIL’s retail footprint to create a hybrid, online-offline commerce platform. “We estimate that (RIL’s) RoCE can rise 400 basis points by FY20 to 12.4% as Reliance sweats its assets and energy margins rise,” the Morgan Stanley report states.

The new product lines that RIL is thinking of in its hydrocarbon value chain are a reflection of the way in which the world economy is headed. According to Ambani, high-value materials like butyl rubber will have use in the transportation and alternate energy sectors, while composites and carbon fibre will cater to the electric vehicles segment.

“Environmental regulation is now a global imperative,” Ambani said. “As the word migrates from fossil fuels to renewable energy, we will further maximise this oil to chemicals conversion and upgrade all of our fuels to high value petrochemicals.”

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.