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MUMBAI/BENGALURU (Reuters) – Inc is set to snag a 3.58% minority stake in India’s Future Retail, which operates more than 1,500 stores in India and owns several supermarket brands, including budget department and grocery store chain, Big Bazaar.

FILE PHOTO: A security personnel walks past the Big Bazaar retail store in Mumbai June 9, 2012. REUTERS/Vivek Prakash/File Photo

Future Retail said in a regulatory filing late on Thursday that Amazon has agreed to acquire a 49% stake in Future Coupons Ltd. That entity in turn owns a 7.3% interest in Future Retail, according to prior filings.

The companies did not disclose the value of the deal, which gives Amazon a stake in one of India’s biggest retail chains, whose stores sell everything from clothes to fresh produce.

The transaction valued Future Retail at a “substantial premium” to its existing market price, a source familiar with the matter told Reuters.

The Economic Times reported that the deal pegged the Mumbai-based company’s value at about 430 billion rupees ($5.98 billion), more than double its current market capitalization of $2.91 billion.

Amazon and Future Retail declined to comment on the value of the transaction that remains subject to regulatory approval.

Future Retail’s shares were down 5% at 393 rupees in morning trade in Mumbai, as many investors had expected Amazon to purchase a 10% stake based on previous media reports. The two sides have reportedly been in talks for more than a year.

“The earlier expectation was Amazon would invest via a fresh issue, but now the money’s going to the promoter and the company is not benefiting,” said Deepak Jasani, senior vice president at HDFC Securities. “People had bought on expectation, and now are selling on the news.”

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The regulatory filing said the deal gives Amazon the right of first refusal should Future Retail’s founder, Kishore Biyani, or his family decide to further trim the 47.02% stake they own in the company, both directly and via entities like Future Coupons that they control.

The online retailer announced plans on Thursday to launch its Amazon Fresh service to select areas in India’s tech hub of Bengaluru, the e-commerce company’s first such foray into delivering fresh produce in India, seen its last major growth market.

In addition to over 290 Big Bazaar outlets, Future Retail also operates a dozen up-market grocery stores under the banner, Foodhall. Convenience store chain 7-Eleven Inc has also tied up with Future Retail to operate its stores in the country.

The Future Retail transaction marks Amazon’s second such move to acquire a stake in an Indian supermarket store operator. Last year, Amazon and Indian private equity firm Samara Capital announced a joint investment in an entity that would give Amazon a stake in Indian supermarket chain More. Amazon also owns a stake in Indian department store chain Shopper’s Stop.

Early this year, India revised its e-commerce rules, creating hurdles for Amazon and rival Walmart Inc’s e-commerce subsidiary, Flipkart. One revised rule bars an entity in which a foreign e-commerce company or its group companies have a stake from selling on their online platform.

These and other restrictions forced Amazon to alter how it structures some of its equity holdings in the country.

India’s revised e-commerce regulations, along with its push to compel multinationals to store data locally, have irked the U.S. government and heightened trade tensions. India has argued the rules are aimed at protecting interests of its small traders and privacy of its citizens.

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Ahead of the launch on Wednesday of Amazon’s biggest campus in the world, in the southern Indian city of Hyderabad, Amazon’s India head, Amit Agarwal, said India should encourage e-commerce and not try to “define every single guard rail under which it should operate.”

Reporting by Euan Rocha in MUMBAI and Nivedita Bhattacharjee in BENGALURU; Editing by David Gregorio and Stephen Coates

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