Focus on Profitability Over Share Price, Says NSE Chief Ashish Chauhan

In an era of market volatility, business leaders must prioritize fundamental strength over short-term stock fluctuations to ensure long-term survival. NSE MD and CEO Ashish Chauhan has emphasized that sustainable growth and profitability should remain the primary objectives for entrepreneurs seeking to build lasting value.

Fundamentals Drive Market Valuation

Speaking at the 9th JITO Incubation & Innovation Foundation (JIIF) Day event, Ashish Chauhan made it clear that a company’s market valuation must be a direct reflection of its underlying business performance. He cautioned entrepreneurs against chasing higher share prices in isolation, noting that market value cannot be artificially inflated without corresponding business growth.

"If the company's profit increases, the share value should increase. You cannot keep increasing value without creating actual business growth," Chauhan stated. He urged founders to stay focused on their core business operations rather than being swayed by fleeting market trends or the perceived success of their peers. According to the NSE chief, companies that consistently deliver results and maintain strong fundamentals will inevitably be rewarded by the market.

The Strategic Advantage of Going Public

One of the most significant advantages of entering the public markets is the massive valuation arbitrage it offers. Chauhan highlighted that public markets reward profitable businesses with valuations that private balance sheets often struggle to match. For instance, a company generating an annual profit of ₹2 crore could potentially command a market capitalization of ₹40 crore to ₹50 crore once listed.

Beyond the influx of capital, listing provides a company with its own "currency." A listed promoter can leverage stock to acquire other businesses, bring in strategic partners, and attract top-tier talent. Chauhan cited the early success of Infosys, where founders N.R. Narayana Murthy and Nandan Nilekani utilized employee stock options (ESOPs) to secure high-quality talent that the company otherwise could not have afforded.

Innovation and the Path to Listing

Chauhan also redefined the concept of innovation for modern entrepreneurs. He noted that innovation is not strictly reserved for massive technological breakthroughs; rather, it can manifest through small, incremental improvements in everyday business processes. Doing something "differently and in a better way" is, in itself, a form of innovation.

Regarding the transition to the public markets, Chauhan addressed the common fear surrounding the complexity of IPOs. He noted that getting listed is not as difficult as often perceived. However, he warned that the real challenge lies in the post-listing phase, where companies must maintain rigorous discipline in compliance, governance, and transparency to sustain investor trust.

Key Takeaways

• Prioritize Profitability: Long-term share price appreciation must be a byproduct of actual business growth and increased profitability rather than a primary target.
• Leverage Public Equity: Listing on a stock exchange provides a unique "currency" that allows companies to raise capital, execute acquisitions, and attract talent through ESOPs.
• Commit to Governance: While listing is accessible, maintaining high standards of transparency and regulatory compliance is essential for long-term success in the capital markets.