National Stock Exchange (NSE) Managing Director and CEO Ashish Chauhan has strongly encouraged startups and Micro, Small, and Medium Enterprises (MSMEs) to consider public listing not merely as an exit strategy, but as a powerful mechanism for business expansion and sustained growth.
Speaking at the JITO Incubation and Innovation Foundation's (JIIF) Foundation Day event, themed 'Compounding Bharat: Innovation Multiplied by Entrepreneurship', Chauhan underscored the multifaceted advantages of going public.
Capital Without Ceding Control
Chauhan emphasized that public listing allows founders to secure crucial growth capital without relinquishing control of their ventures. He clarified that promoters can initially offer a 25% equity stake to the market, retaining a significant 75%, and dilute further only as business requirements dictate.
"Public listing lets founders raise growth capital without surrendering control... 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."
This approach ensures that strategic decision-making power largely remains with the original promoters, addressing a common concern among entrepreneurs.
Enhanced Governance, Credibility, and Talent Attraction
Beyond capital, Chauhan highlighted how public markets significantly improve a company's governance standards and enhance its overall credibility. This, in turn, makes it easier to attract top-tier talent, a critical component for scaling ambitious businesses.
He cited the early use of employee stock options (ESOPs) at Infosys by N.R. Narayana Murthy and Nandan Nilekani as a prime example of how listing can be leveraged to recruit skilled professionals who might otherwise be out of reach.
Unlocking Valuation and Strategic Flexibility
The NSE chief also pointed out the substantial valuation premium that public markets often bestow upon profitable businesses, a level typically unmatched by private balance sheets. He gave an example of a company earning an annual profit of Rs 2 crore potentially commanding a market capitalization of Rs 40 to 50 crore once listed.
This increased valuation provides promoters with greater flexibility to raise capital, bring in strategic partners, and expand operations. A listed company can also use its stock to acquire other businesses, fostering inorganic growth opportunities.
Simplified Compliance and Succession Planning
Addressing concerns about regulatory burdens, Chauhan stated that compliance requirements for listed entities, particularly for smaller firms, are often lighter than commonly perceived and can be routinely managed by a company secretary. He also noted that listing simplifies orderly succession planning by making it easier to divide assets among heirs.
Focus on Business Fundamentals, Not Share Price Volatility
Chauhan cautioned founders against fixating on short-term stock price movements or chasing artificial trading volumes. He stressed that the true value of a business lies in its operations and sustained profitability, with the stock market merely reflecting these underlying fundamentals.
"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."
He encouraged entrepreneurs to direct their energy towards operational excellence, asserting that share prices would naturally follow sustained growth in profits. The NSE's SME platform has already facilitated over Rs 21,700 crore in capital raising, with a combined market capitalization exceeding Rs 2 lakh crore, demonstrating the segment's potential.
This keynote comes as the NSE itself has filed its draft prospectus for a significant public offering, a listing anticipated for nearly a decade.