The Power Grid offering, which was approved by the Cabinet earlier this month, includes fresh issue of company shares and the government's divestment of a 4% stake.
The government's planned sale of stakes in Power Grid and other state companies including miner Coal India is critical to relieving pressure on public finances that could put the country's investment-grade credit rating at risk.
India has targeted raising $6.4 billion from selling stakes in state companies in the fiscal year ending March 2014, but has so far managed about $230 million, as ministries squabble over the timing of the issues and the rupee's fall against the dollar.
The Power Grid issue is likely to remain open for investors to bid until December 6, said the sources, who declined to be named as they were not authorised to speak to the media before a public announcement.
A Power Grid official said the issue was likely to be launched in December but he was not aware of the launch date. Ravi Mathur, secretary at the department of disinvestment, was not immediately available to comment.
Shares of Power Grid were trading down 1.3% at R95.10 on Tuesday. At the current market price the sale of 787 million shares, of which 185 million will be sold by the government, will raise about $1.2 billion. Power Grid said on Monday that it had filed for the follow-on offering with the market regulators.