Indian steel-to-shipping conglomerate Essar Group has been in talks with banks to explore options, including an initial public offering, for its stake in its Indian telecoms venture with Britain's Vodafone, according to three people familiar with the matter.

A potential IPO would involve the listing of the venture, Vodafone Essar, and would need both Vodafone's and Essar's approval, another person familiar with the matter said.

Essar holds a 33 percent stake in Vodafone Essar, India's No. 3 mobile firm.

The talks are preliminary, and Essar has not yet appointed banks to handle the process, said the sources, who declined to be named as they were not authorised to speak with the media.

"As a policy we do not comment on market speculation," an Essar spokesman said.

Vodafone declined to comment.

News of the potential listing of Essar's stake in the venture was earlier reported by Bloomberg.

Vodafone has yet to decide on its response and is waiting for Essar to make a proposal, Bloomberg said, citing a person familiar with the matter.

In 2007, Vodafone bought a controlling stake in Hutchison Whampoa Ltd's mobile business in India, in which Essar had been a partner.

The deal gave Essar the option to sell its entire 33 percent stake in the telecom venture to Vodafone for $5 billion between the third and fourth years of the deal's completion.

Alternatively, Essar could sell shares worth between $1 billion and $5 billion in the company to Vodafone at an independent valuation.

The option for the sale opened in May and runs for 12 months.

In April, Essar, controlled by billionaire brothers Shashi and Ravi Ruia, raised 1.27 billion pounds through a London IPO of its energy and power businesses.

In February, Essar sold its telecoms tower unit to American Tower Corp for about $432 million, and in November, it agreed to buy a majority stake in Dhabi Group's telecommunication businesses in Uganda and Congo.

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