India-focused miner Vedanta Resources is close to a deal to buy a 51 per cent stake in Cairn India for $8 billion to $8.5 billion, a source familiar with the matter said.

The deal would represent Vedanta's first foray into oil and gas, and help Edinburgh-based Cairn Energy fund an expensive drilling programme in Greenland.

The two companies said they were in talks about Vedanta, buying a stake in Cairn India, which is 62.4 per cent owned by the British firm.

Two sources said a deal to give Vedanta control of Cairn India was at an advanced stage.

The proposed sale price suggests an around 25 per cent premium to the valuation of Cairn India before news of the planned acquisition was first reported.

The bid raised concerns that Vedanta may become overstretched, given its current debt position, investment commitments and recent agreement to buy Anglo American's zinc assets for $1.34 billion, analysts at Credit Suisse said.

A huge oil find in Rajasthan helped propel Cairn Energy from a small company to a member of the FTSE 100 Index of Britain's largest companies.

Cairn India's Rajasthan field should soon begin to throw off large quantities of cash, which could help fund Cairn Energy's ongoing drilling commitments.-Reuters