UPDATE 1-India's $2 bln NTPC share sale likely Feb. 7 - sources
* To sell 9.5 percent stake through auction
* Sale part of plan to cut fiscal deficit (Adds detail, background)
By Sumeet Chatterjee
MUMBAI, Jan 25 (Reuters) - India's plan to raise about $2 billion selling a stake in power producer NTPC Ltd will likely take place on Feb. 7, three sources with direct knowledge of the situation said on Friday.
The government, which owns 84.5 percent of NTPC, plans to sell a 9.5 percent stake worth $2.3 billion at current prices through an auction as part of efforts to cut its fiscal deficit.
A floor price for the auction will likely be announced a day ahead of the offering, said the sources, who declined to be named as they were not authorised to speak to the media before a public announcement.
The Department of Disinvestment, responsible for handling government sales of stakes in companies, was not available to comment.
Earlier this month, it picked Citigroup, Deutsche Bank , Goldman Sachs, Kotak Mahindra Capital, Morgan Stanley, and SBI Capital Markets to run the share sale.
A marketing roadshow for NTPC, which started this week, was expected to end next week after which the advisors will make their recommendation on a floor price, two sources said.
Selling down its shareholding in companies is a central plank of the government's plan to cut its fiscal deficit to 5.3 percent of GDP in the current financial year from 5.8 percent in 2011/12.
India's hefty fiscal deficit has triggered warnings of a potential credit rating downgrade.
The government aims to raise 300 billion rupees ($5.6 billion) selling shares in its 2012/13 fiscal year to March.
It got a boost from a $1.1 billion issue of miner NMDC Ltd last month. Before the NMDC share sale, the government had raised $148 million in the current year in a process hit by volatile markets and wrangling among government officials.
NTPC shares fell 0.6 percent to 159.35 rupees on Friday in a positive Mumbai market. (Editing by Dan Lalor and Tony Munroe)
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