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

National Stock Exchange (NSE) MD and CEO Ashish Chauhan has urged entrepreneurs to prioritize sustainable business models and long-term value creation over the superficial pursuit of higher stock valuations. Speaking at the 9th JITO Incubation & Innovation Foundation (JIIF) Day, Chauhan emphasized that market capitalization should serve as a direct reflection of a company's fundamental performance.

Chauhan highlighted a critical distinction between business growth and stock price manipulation. He argued that while entrepreneurs often feel pressured by market trends or peer performance, true shareholder value is a byproduct of strong fundamentals. "If the company's profit increases, the share value should increase. You cannot keep increasing value without creating actual business growth," Chauhan stated.

He advised founders to remain anchored to their core business objectives. According to the NSE chief, the market eventually recognizes and rewards companies that consistently deliver results, suggesting that chasing short-term price spikes is a counterproductive strategy for long-term success.

The Valuation Multiplier and "Stock as Currency"

One of the most compelling arguments presented by Chauhan was the massive valuation advantage provided by public markets. He noted that listing allows a company to unlock value that private balance sheets simply cannot 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 it hits the exchange.

Beyond mere valuation, Chauhan explained that listing provides a company with its own "currency." A listed promoter can leverage stock to:

  • Acquire other businesses: Using shares instead of cash for strategic expansions.
  • Attract Partners: Bringing in high-level collaborators through equity.
  • Reward Talent: Using Employee Stock Options (ESOPs) to attract top-tier professionals. He cited the early strategies of Infosys founders NR Narayana Murthy and Nandan Nilekani as a prime example of using ESOPs to build a world-class team.

Redefining Innovation and Compliance

Addressing the mindset of modern entrepreneurs, Chauhan redefined innovation. He argued that it is not reserved solely for massive technological breakthroughs but can be found in small, incremental improvements to everyday processes. Doing something "differently and in a better way" is, in itself, a form of innovation.

Finally, he addressed the transition from private to public ownership. While he noted that the process of getting listed is not as daunting as many perceive, he warned that the real challenge lies in what happens afterward. Post-listing, companies must maintain rigorous discipline, focusing heavily on compliance, corporate governance, and transparency to sustain investor trust.

Key Takeaways

  • Growth-Led Valuation: Share prices should be a lagging indicator of business profitability and fundamental growth, not a standalone target.
  • The Power of Listing: Public markets offer a significant valuation multiplier and provide equity that acts as a strategic currency for acquisitions and talent retention.
  • Governance is Crucial: Once listed, the focus must shift toward maintaining high standards of transparency and regulatory compliance to ensure long-term survival.