Focus on Profits Over Share Prices for Sustainable Growth: NSE Chief

National Stock Exchange (NSE) MD and CEO Ashish Chauhan has issued a vital directive to entrepreneurs, urging them to prioritize core business fundamentals over short-term market valuations. Speaking at the 9th JITO Incubation & Innovation Foundation (JIIF) Day, Chauhan emphasized that long-term shareholder value is a byproduct of actual business expansion, not mere price manipulation.

Ashish Chauhan highlighted a critical distinction between a company's market valuation and its actual business performance. He argued that a company’s share price should ideally act as a reflection of its underlying growth and profitability. "If the company's profit increases, the share value should increase. You cannot keep increasing value without creating actual business growth," Chauhan stated.

He cautioned entrepreneurs against being swayed by peer pressure or volatile market trends. Instead, he suggested that founders must remain anchored to their core business objectives. According to Chauhan, companies that consistently deliver results and maintain strong fundamentals will eventually earn the market's recognition and higher valuations naturally.

The Strategic Advantage of Public Listing

One of the most significant benefits of transitioning from a private entity to a public company is the massive leap in valuation potential. Chauhan pointed out that public markets reward profitable businesses with valuations that private balance sheets often cannot replicate. For instance, a company generating an annual profit of ₹2 crore could command a market capitalization of ₹40 crore to ₹50 crore once listed.

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

  • Acquire other businesses through stock-based transactions.
  • Attract high-quality partners and investors.
  • Reward talent through Employee Stock Option Plans (ESOPs).

He cited the early success of Infosys, where founders N.R. Narayana Murthy and Nandan Nilekani used ESOPs to attract top-tier talent that they otherwise might not have been able to hire.

Redefining Innovation and Governance

Chauhan also broadened the definition of innovation for the modern entrepreneur. He noted that innovation is not exclusively reserved for major technological breakthroughs; rather, it can manifest as small, incremental improvements in everyday operational processes. "Whatever you do, if you do it differently and in a better way, that is also innovation," he remarked.

While addressing the complexities of going public, Chauhan reassured founders that the listing process itself is not as daunting as perceived. However, he warned that the real challenge lies in what happens after the IPO. Once a company enters the public domain, maintaining rigorous discipline regarding compliance, corporate governance, and transparency becomes mandatory for long-term survival and growth.

Key Takeaways

  • Value Creation: Share price should be a direct reflection of profitability and business growth rather than a standalone target.
  • The Listing Multiplier: Public listing allows companies to command significantly higher valuations and provides "stock currency" for acquisitions and talent retention.
  • Post-Listing Discipline: Success in the public market requires a steadfast commitment to corporate governance, transparency, and operational innovation.