Focus on Profitability and Growth Over Share Price, Says NSE Chief

National Stock Exchange (NSE) MD and CEO Ashish Chauhan has urged entrepreneurs to prioritize sustainable business models and long-term value creation over the short-term pursuit of high stock valuations. Speaking at the 9th JIIF Day event, Chauhan emphasized that market capitalization should be a direct byproduct of actual business performance and fundamental strength.

Fundamentals Must Drive Market Valuation

Ashish Chauhan highlighted a critical distinction between business reality and market perception. He argued that while share prices are a reflection of a company, they cannot be decoupled from underlying 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 warned entrepreneurs against being swayed by market trends or peer pressure, suggesting that companies focusing on their core competencies and consistent results will eventually receive the market's recognition. For Chauhan, the objective of any entrepreneur should be to expand the business footprint and increase shareholder value through robust fundamentals rather than chasing speculative gains.

The Strategic Advantage of Being a Listed Entity

A key highlight of Chauhan's address was the immense value proposition offered by public markets. He pointed out that public markets reward profitable businesses with valuations that private balance sheets often cannot match. To illustrate this, he noted that a company generating an annual profit of ₹2 crore could potentially command a market capitalization of ₹40 crore to ₹50 crore once it goes public.

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 deals.
  • Attract high-quality strategic partners.
  • 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 the company otherwise could not have hired during its formative years.

Innovation and Post-Listing Discipline

Redefining the concept of entrepreneurship, Chauhan noted that innovation is not strictly reserved for massive technological breakthroughs. He suggested that innovation can manifest as small, incremental improvements in everyday processes—essentially, doing things differently and better.

Addressing the transition from a private to a public entity, he remarked that the listing process itself is not as daunting as many founders perceive. However, he cautioned that the real challenge lies in the aftermath. Once a company enters the public domain, maintaining strict discipline in compliance, corporate governance, and transparency becomes non-negotiable to ensure long-term survival and growth.

Key Takeaways

  • Value vs. Price: Market valuation should be a reflection of business performance; share prices cannot rise sustainably without actual profit and growth.
  • The Listing Multiplier: Public markets can provide massive valuation multiples (e.g., ₹2 crore profit potentially yielding ₹40–50 crore market cap) and offer stock as a strategic currency.
  • Governance is Critical: While getting listed is manageable, long-term success in public markets requires unwavering focus on transparency, compliance, and disciplined governance.