Lalpir and Pakgen power go for buyback of shares. The decision has been coming for a long time

Nearly a year ago, Profit did a story which highlighted the fact that many of the listed companies in the energy sector were trading at a market price which was even below the amount of cash they held on their books. 

In simple terms, the assets of the company were worth much more than what the market was pricing the company at. The reason? The recent cancellation of the government contracts made under the Central Power Purchasing Agency (CPPA-G) would have meant that the revenue stream of many of these power generation companies was going to be cut short. The result? As profits were expected to fall, the market priced in the losses and was willing to pay a price much lower than the company was worth.

Now it seems that the energy sector has taken a step in response. Lalpir and Pakgen power are two companies who are jumping on the opportunity and buying back their shares at a discount price in the market. Rather than being reactive, both these companies have taken the proactive decision to take advantage of the opportunity and buy back their own shares. The reason they have given for this purchase is that it will increase the book value per share. This can prove to be the first in a domino effect that might see similar buybacks being carried out by the other listed companies as well.

What led to the current situation, what will the buyback entail and how can the other companies take the buyback to its extreme limits? Profit tries to unpack what the future holds for these companies and how this can prove to be a crossroads for the sector.