Indian Oil said the proposal is at an early stage and needs approval from Indian Oil's board of directors and majority shareholder, the Indian Ministry of Petroleum and Natural Gas which holds an 80% stake in the firm.

A decision is expected to be made at the next board meeting scheduled for Tuesday 25 June. The company, which is ranked 209 on Fortune magazine's Global 500 list of the world's largest companies - is keen to expand its portfolio to include an upstream business after the country's oil sector was fully deregulated.

Officials couldn't say how much the company would invest in oil and gas exploration although some industry sources claim Indian Oil has earmarked nearly US$1 billion in the next few years.

Proceeds from a proposed public equity issue may be used to fund upstream investment. The company also said it is likely to pursue an overseas float to raise more than 15 billion rupees through an issue of around 7.7 million shares.

An Indian Oil executive said last week the proceeds from the company's equity issue would be used to service company debt - estimated at INR190 billion - and to fund further growth.