Reliance Industries (RIL) saw a strong performance from the O2C business in the March-ended quarter. Reliance Retail reported a 25 percent sequential revenue growth while for Reliance Jio it was a subdued performance.

According to Jal Irani, Senior Vice President-Institutional Equity Research, at Edelweiss Financial Services, the gas business is coming back with a big bang and the O2C business could be a material positive surprise this year.

“On the O2C business, while we don’t have a break up between refining and petrochemicals anymore, the petrochemical business has been doing exceptionally well. My thought is that the O2C business as a whole, including refining, will do very well going forward as well,” he said.

He also believes that the higher oil prices tend to benefit RILs margins.

According to Irani, Reliance could see a de-rating if Reliance Retail and Jio disappoint. “The very heavy valuations which the market is giving is attributed to the Jio and the retail business. If that disappoints, then you could have not only an earnings miss but a valuation de-rating from very heady levels as well,” he said in an interview with CNBC-TV18.

He said that the market is building in 30 percent CAGR for the next 10 years for Jio and Retail business which is a very tall ask.

Irani said that the retail business is showing significant signs of weakness and Jio needs to hike tariff by 20 percent to increase profits significantly, and hence there could be a major shift of profits this year into the O2C and upstream gas business.

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(Edited by : Abhishek Jha)