Companies should focus on business growth, profitability rather than just share price: NSE chief

NSE MD and CEO Ashish Chauhan said on Friday that companies should focus on building sustainable businesses, improving profitability and creating long-term value instead of just chasing high share prices.

Addressing the 9th JITO Incubation and Innovation Foundation (JIIF) Day event, he said that a company’s market valuation should reflect its business performance and growth.

An entrepreneur should aim to expand the business through strong fundamentals and increase shareholder value, he suggested.

“If the company’s profits increase, the share value should increase. You cannot increase the value without creating real business growth,” Chauhan said.

He said that entrepreneurs need to focus on their core business instead of being swayed by market trends or peer pressure.

Companies that consistently grow and deliver results are ultimately recognized by the market, he added.

Public markets reward profitable businesses with valuations that private balance sheets cannot match. 2 crore annual profit, he said, once listed, the promoter can get a market capitalization of Rs 40 to 50 crore to raise capital, bring in partners and expand operations.

The listing also gives the company its own currency, Chauhan said.

A listed promoter can use the stock to acquire other businesses, draw in partners and reward staff through stock options, he said, citing the early use of employee stock options at Infosys to attract talent by NR Narayan Murthy and Nandan Nilekani that the company could not hire otherwise.

He also highlighted the importance of innovation in entrepreneurship, saying that innovation is not limited to major technological breakthroughs but can happen through small improvements in day-to-day processes.

“Whatever you do, if you do it differently and better, that is also innovation,” Chauhan said.

Chauhan said the journey to building a business involves significant challenges and perseverance, with many founders facing years of struggle before achieving success.

On the journey to listing, he said getting listed on the stock exchange is not as difficult as is often believed, but companies need to focus on compliance, governance and transparency after entering the public markets.

Chauhan said the capital market provides opportunities for companies to raise funds and grow, but businesses need to maintain discipline and focus on long-term value creation.