* ONGC to file prospectus with regulator late Monday
* Offer to start Sep 20, close Sep 23
* Offer delayed by more than 6 months (Adds details, background)
By Prashant Mehra and Sumeet Chatterjee
MUMBAI, Sept 5 (Reuters) - Indian state-run explorer Oil and Natural Gas Corp's follow-on share sale, valued at around $2.5 billion and delayed by more than six months, is likely to launch on Sept 20 and will close on Sept 23, sources said on Monday.
The share sale, first scheduled for March, has been postponed several times this year due to turmoil in global markets and lingering concerns over government fuel subsidies, part of which are borne by ONGC.
At the current stock price, the sale of a 5-percent stake by the Indian government would fetch nearly $2.5 billion but the shares are widely expected to be issued at a slight discount as the government looks to attract investors in a volatile market.
ONGC is likely to file the prospectus for the public offer with the markets regulator later on Monday, the sources said, declining to be identified as the matter was not public yet.
Bank of America Merrill Lynch , Citi , HSBC , JM Financial , Morgan Stanley and Nomura are the managers on the issue.
The offer is part of a broader federal plan to raise about $9 billion from share sales this fiscal year, an effort aimed at plugging India's fiscal gap and generating funds for schemes for the poor.
Last year, the government raised $3.4 billion from a blockbuster initial public offer of Coal India , the world's largest coal miner.
In May, India raised more money in a $1 billion share sale in Power Finance Corporation's , the only divestment so far this fiscal year. The government received heavy interest from foreign investors for both those offers.
Indian companies raised $7.1 billion in equity in the first half of 2011, down 42 percent from the year-ago period, Thomson Reuters data showed.
India's main stock index is down nearly 19 percent so far this year, making it one of the world's worst-performing markets.
ONGC, the third-largest listed firm in India by market value, has declined more than 20 percent so far in 2011.
The company posted a 12-percent rise in first quarter profit, helped by higher crude oil and gas prices, but has seen its profit growth slow in recent quarters due to state-set fuel prices, which are lower than market rates. (Editing by Jui Chakravorty)
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