The Financial Times newspaper is to buy a 13.85% stake in India's Business Standard, in the first such deal since the government relaxed rules for foreign investment in the media.
International diversification for Financial Times
The FT will be paying 141m rupees ($3m) to purchase its stake in the Indian paper, which will remain editorially independent.
The move follows the decision last year by the Indian government to allow foreign firms to invest up to 26% in Indian print media.
The Indian government is also reviewing rules which bar foreign news agencies from selling their copy directly to the country's newspapers.
The Business Standard is India's second largest selling newspaper, and is published in seven Indian cities.
In a statement, Financial Times chairman David Bell said: "This is an important strategic step for the Financial Times as we expand our presence in the important Asian marketplace."
T.N. Ninan, editor and publisher of the Business Standard, said it was a vindication of their editorial position.
"We have worked long and hard to persuade the government to allow foreign direct investment in the media," he said.
The two papers already collaborate through a syndication deal which allows the Business Standard to use reports from the FT's foreign bureaux.
The Financial Times has been pursuing a strategy of international diversification to counteract its declining sales in the UK.
The paper is printed in 21 cities worldwide and nearly half of its sales come from overseas.
It prints a separate American and European edition, and also publishes a German newspaper, FT Deutschland.
However it has found it hard to compete with the US business newspaper, the Wall Street Journal, in both America and Asia.
And the increasing losses at the FT - caused by the slump in financial sector advertising - have dragged its owners, the Pearson Group, into the red.
The FT has been battling tough conditions with sales down 5% to a daily average of 461,000 in the six months to June 30. Advertising revenues fell 18%
Pearson plans to cut costs further at the Financial Times, earmarking another £15m of savings for 2004 after cutting £13m this year.
Pearson's losses have been offset by the strength of its publishing operations, including the Penguin imprint.