The Initial Public Offering of Bharat Petroleum Corporation Ltd is likely to be priced at Rs 500-600 per share, according to market sources. BPCL's overseas offering is expected to be at a 20-25 per cent premium over the IPO price.

Merchant banking sources familiar with the developments confirmed the price band in which the government is likely to offload part of its stake.

However, senior officials at a merchant banking arm, that is likely to be associated with the deal, added: "As the divestment will be by way of a market deal, much also depends upon the market valuation at that point of time."

The government proposes to divest 25.2 per cent of BPCL's equity through an American Depository Receipts issue and another 10 per cent in the domestic market to retail and institutional investors.

This will effectively bring down the government holding from the present 66.2 per cent to 26 per cent after offering 5 per cent of the shares to the employees at one-third the issue price.

The market also expects the Securities & Exchange Board of India to issue the necessary guidelines for a simultaneous float in the domestic and overseas markets, by the time the company is ready to go to the market. Simultaneous offerings will be necessary considering the size of the offer.

Incidentally, the BPCL stock is also expected to be split from the current face value of Rs 10 to Rs 2 per share. This means that the offering will range at Rs 100-Rs 120 per share, making it more accessible to the retail investors.

With a Sebi committee proposing to change the retail investor definition to those investing up to Rs 50,000, retail investors would find it difficult to invest if the pricing is finalised with shares at a face value of Rs 10 per share.

On the back of the success of the Maruti IPO, the central government is looking at offloading its 35 per cent stake in Bharat Petroleum Corporation Ltd.

The government is also learnt to be trying to gauge whether the market will be able to absorb the offering from an oil company. The government will be getting strategic investors to underwrite the issue.

"There is serious appetite from institutional and retail investors for high quality issues, and the government will be able to encash on this demand," said merchant banking sources. A lot of institutional demand in the recently concluded Maruti IPO was from foreign investors.