Indian health insurer Niva Bupa is planning to raise $360 million in an IPO, potentially valuing the business at up to $2.5 billion, according to two sources and a document seen by Reuters, the latest company to cash in on a stock market surge.

British United Provident Association (Bupa), which holds a 63% stake in the Indian venture, plans to sell a small stake worth up to $38 million and Indian private equity firm True North is planning a stake sale worth up to $225 million, the document detailing the IPO plans showed.

It will file papers with India's markets regulator to seek IPO approval in the next week, the sources said.

Niva Bupa, Bupa U.K and True North declined to comment.

Niva Bupa's plans are the latest example of India's booming IPO markets, where investors are pouring record amounts of money into small and big companies. Earlier this month, Korean auto major Hyundai filed for what could be the country's biggest-ever IPO.

Of the $360 million offering, Niva Bupa will be raising $96 million by issuance of new shares, while $264 million worth of shares will be sold by existing investors, the document shows.

It will use funds raised to strengthen its balance sheet and for operating expenses, according to the document.

Niva Bupa has hired Morgan Stanley and Indian banks ICICI, Kotak, Axis, HDFC and Motilal Oswal for the IPO, the document shows. The banks did not respond to queries seeking comment.

India is among the nations with the lowest insurance penetration rates among large countries but adoption is growing fast after the COVID pandemic "increased risk awareness," Niva Bupa said in its 2022 annual report.

Insurance sales are rising with soaring healthcare costs in India, where most citizens rely on private healthcare as government hospitals tend to be overburdened.

Niva Bupa has partnered with more than 10,000 hospitals in India. However, it is one of the smaller players with a market share of 1.8% in a sector dominated by insurance ventures of Allianz and Generali.

India in 2021 allowed foreign investors to take a stake of up to 74% in local insurers from 49% earlier. In 2023, U.K's Bupa increased its stake in the Indian venture by 20% to 63%.

Among other IPOs, electric-scooter maker Ola Electric, SoftBank-backed retailer FirstCry and mortgage financier Bajaj Housing Finance are looking to raise between $500 million to $1 billion from their respective offerings.

(Reporting by M. Sriram; Editing by Aditya Kalra and Anil D'Silva)