RPT-UPDATE 1-Oil India asked not to use IPO cash in Iran

(Repeats story issued late on Wednesday) (Adds more quotes)

By Nidhi Verma

NEW DELHI, Sept 17 (Reuters) - Foreign banks advising Oil India Ltd on its initial public offering have sought an assurance the explorer will not invest the funds raised in Iran and Sudan, which face U.S. sanctions, oil ministry officials said on Wednesday.

The company aims to open its IPO on November 10 to raise more than 15 billion rupees ($325 million) to fund its expansion, the sources said.

They said Oil India plans to invest 23.4 billion rupees in the next financial year, mostly on exploration and development.

HSBC (HSBA.L: Quote, Profile, Research), Citigroup (C.N: Quote, Profile, Research), Morgan Stanley (MS.N: Quote, Profile, Research), and JM Financial Ltd (JMSH.BO: Quote, Profile, Research) are the bankers to the initial public offering.

"The bankers, HSBC, Citi, and Morgan Stanley, with bases in the U.S. have asked Oil India not to invest IPO proceeds in Iran and Sudan," said an oil ministry official with knowledge of the IPO plans, who did not wish to be identified.

State-run Oil India holds a 10 percent interest in a pipeline in Sudan, 20 percent in the offshore Farsi exploration block in Iran, and has stakes in explorations blocks in several countries including Libya, Nigeria and Yemen.

Another ministry official said Oil India was expected to give such an assurance on the IPO funds to attract institutional investors from Western countries.