Companies should focus on building sustainable businesses, improving profitability and creating long-term value rather than merely chasing higher share prices, NSE MD and CEO Ashish Chauhan said on Friday.
Addressing the 9th JITO Incubation & Innovation Foundation (JIIF) Day event, he said a company’s market valuation should be a reflection of its business performance and growth.
The objective of an entrepreneur should be to expand the business and increase shareholder value through stronger fundamentals, he suggested.
“If the company’s profit increases, the share value should increase. You cannot keep increasing value without creating actual business growth,” Chauhan said.
He said entrepreneurs need to remain focused on their core business rather than getting influenced by market trends or peer pressure.
Companies that consistently grow and deliver results eventually get recognised by the market, he added.
The public markets reward profitable businesses with a valuation that private balance sheets cannot match. A company earning an annual profit of Rs 2 crore, he said, could command a market capitalisation of Rs 40 to 50 crore once listed, giving the promoter room to raise capital, bring in partners and expand operations. Listing also gives a company its own currency, Chauhan said.
A listed promoter can use 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 by NR Narayana Murthy and Nandan Nilekani to attract talent the company could not otherwise have hired.
He also highlighted the importance of innovation in entrepreneurship, saying innovation is not limited to major technological breakthroughs but can happen through small improvements in everyday processes.
“Whatever you do, if you do it differently and in a better way, that is also innovation,” Chauhan said.
Chauhan said the journey of building a business involves significant challenges and persistence, with many founders facing years of struggle before achieving success.
On the listing journey, he said getting listed on the stock exchange is not as difficult as often perceived, but companies need to focus on compliance, governance and transparency after entering the public markets.
Capital markets provide opportunities for companies to raise funds and grow, but businesses need to maintain discipline and focus on long-term value creation, Chauhan stated.