Hindustan Composites friction sale: ₹370 crore deal in 2026

Deal overview: slump sale to Rane (Madras)

Hindustan Composites Ltd has agreed to sell its Friction Business Undertaking to Rane (Madras) Limited for a lump sum cash consideration of ₹370 crore. The transaction is structured as a slump sale, meaning the business is being transferred as a going concern. Rane (Madras) said the acquisition is being executed through a Business Transfer Agreement (BTA). The deal is subject to customary regulatory approvals and other closing conditions.

Khaitan & Co advised Hindustan Composites on the sale. The transaction is also positioned as a portfolio expansion for Rane (Madras), adding manufacturing capacity and a brand in the friction materials space. For Hindustan Composites, the move is described as a major structural shift, given the friction segment’s scale within its financials.

What Rane (Madras) will acquire

As part of the transaction, Rane (Madras) will acquire the COMPO brand along with two plants. The scope of the undertaking being transferred includes assets, liabilities, contracts, and licenses connected to the development, manufacturing, and marketing of friction materials. These friction materials serve automobile, railway, and industrial applications.

The buyer has indicated the deal will expand its presence across the aftermarket, fleet operator, and distribution channels. The acquisition adds an established operating setup rather than only select assets, which is consistent with the slump sale structure.

Board approval and agreement timeline

Hindustan Composites’ Board approved the slump sale on June 30, 2026. On the same date, the company entered into the Business Transfer Agreement to divest the friction business undertaking to Rane (Madras). The consideration is stated as ₹370 crore, payable as a lump sum cash amount, subject to transaction adjustments as per the BTA.

The transaction has been communicated as being scheduled to close on or before September 30, 2026, subject to meeting closing conditions. Separately, Rane (Madras) has said it expects to complete the transaction by the end of the second quarter, subject to approvals.

Regulatory and shareholder approvals: what is required

The sale is subject to shareholder approval under Section 180(1)(a) of the Companies Act, 2013, and Regulation 37A of the SEBI Listing Regulations. Hindustan Composites has sought approval through a postal ballot process, with NSDL engaged to facilitate remote e-voting.

Only members holding shares as of the cut-off date of June 30, 2026 are eligible to vote. Shareholders can vote through remote e-voting or via physical postal ballot forms that must reach the scrutinizer by the deadline.

Postal ballot dates and voting window

The company’s postal ballot notice was dispatched to shareholders on July 9, 2026. Remote e-voting commenced on July 10, 2026 at 9:00 A.M. IST and concluded on August 8, 2026 at 5:00 P.M. IST. The results of the ballot are scheduled to be announced on August 11, 2026 at the company’s registered office.

The resolution requires approval by a special resolution. If passed, it is deemed effective from the closing date of the voting process, as stated in the company’s disclosures.

Financial context: Q1FY27 PAT and discontinued operations

Hindustan Composites reported a consolidated profit after tax (PAT) of ₹8.68 crore for Q1FY27, up 16% year-on-year. The company attributed the increase primarily to strong performance in the friction business. At the same time, the friction business has been classified as discontinued operations following the proposed slump sale, and comparative periods have been restated accordingly.

This combination of reported performance and reclassification is significant for readers tracking segment performance, because discontinued operations can change how continuing business profitability is interpreted in subsequent quarters.

How large is the friction business within FY26 numbers

The friction business contributed ₹315.04 crore in turnover in FY26, representing 84% of Hindustan Composites’ total turnover for the year ended March 31, 2026. The net worth of the business is stated at ₹69.52 crore, representing 7.50% of the company’s net worth.

These figures underline why the divestment is considered a major change for the company’s operating profile. After the transfer, the friction segment that drove a large portion of turnover in FY26 will no longer be part of continuing operations.

Key deal details at a glance

Event timeline: record date to results

Market and operating implications for both companies

For Rane (Madras), the acquisition adds a friction materials undertaking, the COMPO brand, and two plants, which the company says strengthens its position across multiple channels including aftermarket and distribution. The structure as a going concern transfer can also help continuity for customer contracts and operations, as it includes liabilities, contracts, and licenses associated with the undertaking.

For Hindustan Composites, the divestment changes the composition of the business, especially given the friction segment’s share of FY26 turnover. The company has already reflected this shift through the classification of the friction business as discontinued operations in its financial statements. The consideration is a lump sum cash amount of ₹370 crore, with adjustments as per the BTA.

Other disclosed governance note: promoter encumbrance

In another disclosure referenced alongside these developments, Hindustan Composites confirmed that its promoters and Persons Acting in Concert did not create any encumbrance on shares during the financial year ended March 31, 2026. The confirmation states that no encumbrance of shares was made directly or indirectly through the period.

Why this transaction matters

The friction business was both a major contributor to turnover in FY26 and a key driver cited for Q1FY27 performance, yet it is being exited via a transfer to Rane (Madras). That makes approval milestones and closing conditions important for tracking how reported earnings and segment reporting will evolve. It also means investors will likely focus on the postal ballot outcome and the timeline toward completion.

The next immediate checkpoint is the postal ballot result announcement on August 11, 2026. The companies have indicated the transaction is expected to close on or before September 30, 2026, subject to approvals and other closing conditions.