Dive Brief:

• Amazon has agreed to acquire a minority stake in Future Retail, an Indian retail company that owns several supermarket brands and operates more than 1,500 stores in India, Reuters first reported.
• Amazon's share of the company will amount to 3.58%, which is worth about $104 million, sources told Reuters. The companies did not disclose the value of the deal.
• Future Retail is India's second-largest retail chain. Its footprint includes department stores, big box stores and grocery stores, including Indian grocers Big Bazaar and Foodhall.

Dive Insight:

Amazon and Future Retail were reportedly in talks about the deal for more than a year. Initially, investors expected Amazon's stake to be closer to 10%, according to Reuters. Amazon also holds stake in two other Indian retailers: supermarket chain More and department store Shopper's Stop. 

The deal coincides with another major announcement that Amazon will expand AmazonFresh to India, starting with service in Bengalaru. The e-commerce giant has also opened its first campus in India, which will house 15,000 of the company's 62,000 employees in the country.

As its acquisition of Whole Foods two years ago proved, Amazon highly values the steady traffic and consumer insights that come with brick-and-mortar grocery. But it also wants to build out its online offerings. After a failed attempt at acquiring Indian e-grocer Flipkart last year, Amazon is making gains in the country, which has one of the fastest-growing retail economies in the world. Since entering the market, Amazon has invested at least $5 billion in the country of 1.3 billion.

Walmart, which won the bid for Flipkart and paid $16 billion to acquire it, is Amazon's toughest competition in India right now. The Flipkart deal was Walmart's largest ever and gave the retailer a major advantage in India's fast-growing e-commerce market. In addition to its presence with Flipkart, Walmart India operates 25 Best Price Modern Wholesale stores in the country. 

India is wary of e-commerce giants entering the country and established a new law late last year that prevents them from forming exclusive partnerships with sellers or selling goods to consumers at steep discounts. According to CNBC, this will make it so that e-commerce companies can only create a "marketplace" for buyers and sellers. 

But the law only applies to e-commerce companies, and Amazon's tie-up with Future Retail gives it a brick-and-mortar foothold with Indian consumers. The move aligns with the company's plans to move from online to physical retail, using its acquired properties as a way to test and learn in the grocery business as it works covertly on its own grocery chain in the U.S.