Yes, the movie Machan is based on a true story.
The film draws inspiration from the real-life incident of a group of Sri Lankans who posed as the "Sri Lankan National Handball Team" to gain entry into Germany for a youth exchange program in Bavaria. Their ultimate goal was to disappear into Europe, most likely to Italy, seeking better opportunities. The film fictionalizes and embellishes this core narrative.
In essence, while Machan takes creative liberties and adds fictional elements for dramatic effect, the central premise of a fake handball team using a youth exchange program as a means of emigration is rooted in a documented event.