Focus on business fundamentals, not stock valuations: NSE CEO
Mumbai, June 26
National Stock Exchange MD and CEO Ashish Kumar Chauhan on Friday urged entrepreneurs to focus on building profitable and sustainable businesses rather than getting distracted by short-term stock price movements, saying that strong business fundamentals ultimately drive long-term market value.
Calling capital markets a key enabler of India's entrepreneurial growth story, Chauhan encouraged startups and MSMEs to view public listing as a strategic tool for scaling their businesses.
Speaking at the JITO Incubation and Innovation Foundation's (JIIF) Foundation Day event at the NSE, he said founders should concentrate on business operations and profitability rather than day-to-day movements in share prices.
"Your business is in your operations, not in the share price. The stock market is only a reflection of your business, it is not the business itself," Chauhan said.
He said public markets provide growth capital, improve governance standards, enhance credibility and help companies attract talent while allowing promoters to retain control of their businesses.
"Public listing lets founders raise growth capital without surrendering control, noting that a promoter can offer 25 per cent of equity to the market at the outset, retain 75 per cent and dilute further only as the business requires," he stated.
He further said that listing improves governance standards, increases credibility, attracts analyst coverage and eases access to bank financing.
The process also facilitates orderly succession planning by making it easier to divide assets among heirs.
"When you list, you keep 75 per cent with yourself and offer 25 per cent to the market in the beginning. You can give more later. Control stays with you," he said.
He said, "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."
— IANS
Reader Comments
Good advice but easier said than done when your competitor is riding a valuation bubble. Indian startups need patient capital. Many founders I know are forced to chase valuations because VCs and media only care about the hype cycle. Mr. Chauhan should also address the ecosystem's obsession with valuations.
As an entrepreneur who listed on NSE Emerge last year, I can vouch for this. The listing process made us audit our books, improve transparency, and actually start making real profits rather than burning cash for vanity metrics. The Rs 2 crore profit -> Rs 40-50 crore valuation example is realistic if you have a solid business model.
Sahi baat hai! But NSE itself should ensure that small investors are protected from manipulated quarterly results. Many companies show fake profits just to get listed, then the stock crashes and retail investors suffer. If Mr. Chauhan is serious about promoting fundamentals, SEBI and NSE need stricter governance monitoring.
I run a small manufacturing unit and have been hesitant about listing because of compliance costs. But his point about succession planning is crucial. Indian family businesses struggle with generational transitions. Listing can actually help divide assets fairly among siblings without endless court cases. Makes me think differently now.
The 75% control retention point is underrated. In India, promoters are often scared of losing control if they go public. But as he rightly said, you can start with just 25% dilution and then raise more later. This is exactly how Infosys and TCS grew - controlled dilution over decades. 🇮🇳
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