Prioritize Growth and Profitability Over Share Price, Says NSE Chief

In a critical piece of advice for entrepreneurs and corporate leaders, NSE MD and CEO Ashish Chauhan has emphasized that sustainable business building must take precedence over chasing short-term stock market valuations. Speaking at the 9th JIIF Day event, Chauhan highlighted that a company's market value should be a direct reflection of its underlying business performance and fundamental strength.

Fundamentals Must Drive Valuation

Ashish Chauhan's core message to the startup and corporate ecosystem is simple: market valuation should follow business growth, not vice versa. He cautioned entrepreneurs against being swayed by market trends or peer pressure, noting that attempting to inflate value without actual business expansion is unsustainable.

"If the company's profit increases, the share value should increase. You cannot keep increasing value without creating actual business growth," Chauhan remarked. He suggested that companies focusing on their core operations and delivering consistent results will eventually be rewarded by the market through natural valuation appreciation.

The Strategic Advantage of Public Listing

One of the most striking points made by the NSE chief was the massive "valuation gap" between private and public entities. Chauhan noted that the public markets offer a unique mechanism to multiply a company's worth. For instance, a company generating an annual profit of ₹2 crore can potentially command a market capitalization of ₹40 crore to ₹50 crore once listed.

Beyond just the capital infusion, Chauhan explained that listing provides a company with its own "currency." A listed promoter can utilize stock as a strategic tool to:

  • Acquire other businesses: Using equity instead of cash to fuel inorganic growth.
  • Attract high-tier partners: Bringing in strategic stakeholders through stock-based incentives.
  • Reward talent: He cited the early days of Infosys, where N.R. Narayana Murthy and Nandan Nilekani used Employee Stock Option Plans (ESOPs) to attract top-tier talent that the company otherwise could not afford.

Innovation and Post-Listing Discipline

Addressing the nature of entrepreneurship, Chauhan redefined innovation, stating it isn't reserved solely for massive technological breakthroughs. Instead, any small improvement in everyday processes that makes a task better or different constitutes innovation. He acknowledged that the journey for most founders involves years of struggle and persistence before reaching the scale required for public markets.

Furthermore, he addressed the perceived difficulty of the IPO process, noting that getting listed is not as daunting as many believe. However, he warned that the real challenge lies in what happens after the listing. Once a company enters the public domain, it must maintain rigorous discipline, focusing heavily on compliance, corporate governance, and transparency to protect long-term shareholder value.

Key Takeaways

  • Value follows Profit: Market capitalization must be a byproduct of actual business growth and increased profitability rather than speculative trading.
  • Stock as a Strategic Asset: Listing allows companies to use equity as a currency for acquisitions, partnership building, and talent retention via ESOPs.
  • Governance is Mandatory: While the listing process is manageable, post-IPO success depends on strict adherence to compliance, transparency, and long-term value creation.