In what will be the first overseas investment in a newspaper company after the government opened the sector last year, AMP of Australia, which has interests in banking, insurance and pensions, is picking up a 20 per cent stake in Hindustan Times Ltd for Rs 125 crore (Rs 1.25 billion).

This will give AMP a representation on the board of the company.

With this money in its war chest, Hindustan Times will take the battle to the enemy camp by launching its Mumbai edition.

In the past couple of years, Hindustan Times and The Times of India have been involved in a slugfest in Delhi -- the traditional Hindustan Times stronghold -- with each claiming higher readership than the other.

Sources close to the deal said The Times of India remained unchallenged in Mumbai and was the market leader by a very large margin. Once its Mumbai edition came out, Hindustan Times hoped to eat into The Times of India sales, the sources said.

Hindustan Times is expected to seek the government's approval for the divestment shortly.

As per the existing government policy on foreign investment in the print media, an overseas investor can acquire up to 26 per cent in a company owning a news publication.

However, the control over the management of the company and the editorial control of the news publication have to remain in Indian hands.

The deal puts the valuation of Hindustan Times Ltd at Rs 625 crore (Rs 6.25 billion).

According to the sources, the company recorded a profit for the financial year 2002-03, thanks largely to rental income.

During the previous financial year, 2001-02, the company had recorded a loss, the sources added.

AMP reported an operating profit of A$317 million (Rs 941.8 crore for the first six months of 2003.

However, owing to writedowns and restructuring costs, it reported a loss of A$2.16 billion (Rs 6,417.36 crore) for the period.

"While the actions we have taken since late 2002 -- including a new board and management team, the closure of businesses, reduction in costs and ultimately the decision to demerge -- have had painful consequences, they are decisive steps aimed at putting AMP on a much stronger footing," the AMP Web site says.

For a few weeks now, talk had been doing the rounds that Rupert Murdoch's Newscorp would pick up a 26 per cent stake in Hindustan Times, and in return Hindustan Times would invest in Star News.

While Hindustan Times denied it, Star India called it purely speculative.