NCLAT Issues Notice to Ambuja Cements on Plea by Sanghi Cement’s Former Promoter
NCLAT :New Delhi: The National Company Law Appellate Tribunal (NCLAT) has issued a notice to Ambuja Cements Ltd (ACL), a key company under the Adani Group, in response to a plea filed by Alok Sanghi, the former promoter of Sanghi Industries Ltd. This move comes after the National Company Law Tribunal (NCLT), Ahmedabad, initiated insolvency proceedings against Sanghi as a personal guarantor for a default of approximately ₹843 crore.
NCLT’s Decision and Sanghi’s Challenge
On February 25, 2025, the NCLT admitted Ambuja Cements’ insolvency petition against Alok Sanghi, holding him liable as a personal guarantor for the unpaid dues of Sanghi Industries. The tribunal appointed Sumit Ranjkanth as the Interim Resolution Professional (IRP) and directed him to investigate the claims and submit a report within ten days.
Challenging this ruling, Sanghi moved the NCLAT, arguing that the insolvency proceedings against him were unjustified. On March 4, 2025, the appellate tribunal, led by Chairperson Ashok Bhushan, provided interim relief to Sanghi by barring the IRP from taking any further steps until the next hearing, which is scheduled for April 14, 2025.
Background: The Ambuja-Sanghi Deal and Financial Liabilities
The dispute stems from the acquisition of Sanghi Industries Ltd by Ambuja Cements in August 2023. Under the share purchase agreement, Alok Sanghi and other shareholders provided warranties, indemnities, and a personal guarantee to cover the company’s financial obligations.
One of the major liabilities involved a massive electricity duty of ₹2,788 crore under the Gujarat Electricity Duty Act, 1958. This demand, initially raised in December 2023, was later revised to ₹1,619.5 crore in July 2024. Sanghi Industries challenged the demand in the Gujarat High Court, but in November 2024, the tax department upheld the dues.
Following Sanghi Industries’ failure to clear these liabilities, Ambuja Cements invoked Sanghi’s personal guarantee and demanded ₹843 crore in December 2024. Despite multiple legal notices, Sanghi did not make the payment, prompting Ambuja to file the insolvency petition in February 2025.
Personal Insolvency Under IBC
The Insolvency and Bankruptcy Code (IBC) of 2016 was amended in 2019 to include provisions for personal insolvency, particularly for personal guarantors to corporate debtors.
- Under Sections 94 to 120 of the IBC, creditors or debtors can initiate insolvency proceedings.
- Once admitted, an interim resolution professional (IRP) is appointed to evaluate the debtor’s financial status and submit a report to the tribunal within 10 days.
In this case, Ambuja Cements argued that Alok Sanghi was legally responsible for Sanghi Industries’ financial obligations and, hence, should be held accountable for the ₹843 crore default.
Adani Group’s Cement Expansion and Market Competition
Ambuja Cements, which acquired Sanghi Industries for ₹5,185 crore, is aggressively expanding under the Adani Group’s leadership.
- In December 2024, Ambuja Cements announced its merger with Sanghi Industries and Penna Cement Industries to consolidate its market position.
- The Adani Group entered the cement industry in September 2022 after acquiring Ambuja Cements and ACC Ltd from Holcim for $6.4 billion (₹51,000 crore).
- The group later launched a ₹31,000 crore open offer to acquire an additional 26% stake from public shareholders.
- In October 2024, Adani Cement announced the acquisition of CK Birla Group’s Orient Cement for ₹8,100 crore, bringing its total production capacity close to 100 million tonnes per annum (mtpa) by FY25.
- By FY28, Adani Cement aims to expand its capacity to 140 mtpa, intensifying its competition with UltraTech Cement Ltd, which remains the industry leader with 156.66 mtpa capacity.
Financial Performance and Key Ratios
| Financial Metric | Ambuja Cements (FY24) | Sanghi Industries (FY24) |
|---|---|---|
| Revenue (₹ Cr) | 35,000 | 3,500 |
| Net Profit (₹ Cr) | 4,200 | -250 |
| EBITDA Margin (%) | 21.5% | 8.2% |
| Debt-to-Equity Ratio | 0.32 | 2.1 |
| Return on Equity (ROE) (%) | 14.3% | -6.5% |
| Production Capacity (mtpa) | 74.6 | 6.1 |
| Market Share (%) | 12% | 1.5% |
What’s Next?
With the next NCLAT hearing scheduled for April 14, 2025, all eyes are on the tribunal’s decision. If Sanghi’s plea succeeds, it could set a precedent for personal guarantors challenging insolvency proceedings. On the other hand, if the tribunal upholds Ambuja Cement’s claim, it would reaffirm the enforceability of personal guarantees under the IBC.
As Ambuja Cements continues its expansion, the case highlights the complex legal and financial challenges that arise in high-value corporate acquisitions. The outcome will not only impact Alok Sanghi and Ambuja Cements but could also influence future corporate insolvency proceedings in India.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.