Indian conglomerate Essar Group said it plans to raise about $2.5 billion by listing its energy and power businesses on the London bourse, tapping new investors to fund its ambitious expansion plans.

Essar, controlled by billionaire brothers Shashi and Ravi Ruia, plans to sell a 20-25 per cent stake in Essar Energy and will use the proceeds to fund projects including the acquisition of coal mines and the development and exploration of oil and gas blocks, the company said.

The sale marks yet another instance of Indian firms looking to expand operations and gain a foothold overseas as they seek new avenues for growth.

"Listing abroad ensures that the company gets much more visibility and much more participation," said Ambareesh Baliga, vice-president at Karvy Stock Broking.

"For Indian companies, they cannot become globally recognised if they concentrate only on India."

The Ruia brothers founded Essar in 1969 following the death of their father and business mentor. Since winning a contract to build a breakwater at the Chennai port in southern India, they have rapidly expanded the group to include shipping, steel, refining, power and telecoms. The brothers are now worth a combined $13bn, according to Forbes.

Essar will file papers for the initial public offering next week, two sources said.

Roadshows would start within two weeks and a listing was expected late this month or early next month, said another source.

The share sale would be the third-biggest by an Indian firm, behind Reliance Power's $2.9bn IPO in 2008 and private-sector lender ICICI Bank's $4.6bn follow-on sale in the US in 2007.

"It is clear that the group requires money, be it for expanding its refining capacity or developing power plants," Deven Choksey, chief executive of K R Choksey Shares and Securities, said.

"There are definitely more investors willing to buy into holding companies such as Essar in London than here in India."

After the offering, Essar Energy will be listed on the London Stock Exchange and will be considered for inclusion in the FTSE 100 index, the company said.

The group's energy and power operations, including four existing power plants with a total installed capacity of 1,220 megawatts, are valued at about $12bn, a source said.

JP Morgan Cazenove is the sole financial adviser for the offer, while it and Deutsche Bank are joint bookrunners.

"Now is the right time to open the business up to global capital, to fuel our future growth ambitions, and to address India's significant energy deficit," said Prashant Ruia, chief executive of Essar Group and Shashi's son.