No-frills airline, SpiceJet, is in discussions with two West Asian airlines, Etihad Airways and Qatar Airways, for a minority stake sale.
The move comes amid expectations that the government would allow foreign airlines to invest directly in Indian carriers.
When contacted, a SpiceJet spokesperson said, "We do not comment on any market speculation."
Some foreign carriers have expressed interest in picking up a stake in SpiceJet if there would be a change at the policy level by the government.
Various investors have approached SpiceJet and we are in talks with them.
As of now, we have not finalised any deal but if everything goes well, we may enter into a mutually beneficial deal," he added.
The discussions with the two airlines were, however, at a preliminary stage, sources familiar with the developments said.
India currently allows up to 49 per cent foreign investment in Indian carriers, but foreign airlines are barred.
Spicejet chief executive officer Neil Mills had said earlier the loss-making airline was approached by a few Gulf and Southeast Asian airlines.
Emails sent to Etihad and Qatar Airways did not elicit any response.
SpiceJet has a market capitalisation of Rs 1,586 crore (Rs 15.86) at Monday's closing price of Rs 32.75 a share on the Bombay Stock Exchange.
In 2010, Sun TV promoter Kalanithi Maran had purchased about 38 per cent stake in SpiceJet for Rs 750 crore (Rs 7.5 billion) at Rs 47.25 a share.
The holding went up to 48.6 per cent after the investment of another Rs 100 crore (Rs 1 billion)
SpiceJet had widened its fourth-quarter loss to Rs 249 crore (Rs 2.49 billion) from Rs 59 crore (Rs 590 million) in the year-ago period.
The carrier, after two consecutive years of profit, ended 2011-12 with a loss of Rs 605 crore (Rs 6.05 billion), against a net profit of Rs 101 crore (Rs 1.01 billion) in 2010-11 and about Rs 62 crore (Rs 620 million) in 2009-10.
Its operating performance improved and its market share in May was 18.5 per cent, making it the third largest domestic airline by passenger volume.
It flies 41 planes -- 34 Boeing 737s and seven turboprop Bombardier Q400s.
The airline launched flights to Dubai on Monday -- its third foreign destination after Colombo and Kathmandu.
Sushi Shyamal, partner-infrastructure practice, Ernst & Young India, said, "The mounting number of international passengers from India in the backdrop of a growing economy and their proximity to India are major reasons for West Asian players to tap the Indian market through possible strategic alliances."
Etihad, which reported its first annual profit of $14 million for 2011, has been on an acquisition spree over the last few months.
It has picked up 29 per cent stake in Air Berlin of Germany and 40 per cent stake in Air Seychelles.
In addition, the airline has picked up three per cent stake in Aer Lingus of Ireland and four per cent in Virgin Australia, which it is likely to raise up to 10 per cent.