Shares in Reliance Communications, India's second-biggest mobile phone carrier by subscribers, rose as much as 4.4 per cent in Mumbai after the announcement on Wednesday.
The company, controlled by billionaire Anil Ambani, is looking to list the undersea cable unit as a business trust in Singapore and will use the proceeds from the proposed share sale to cut its debt burden - $7 billion as of March.
The Singapore exchange granted an "eligibility to list" the unit as a business trust, Reliance Communications said in a statement to Indian stock exchanges. The company did not say when it plans the IPO.
Sources have said the IPO could be launched in July, but that would be difficult in a volatile market.
Motor sport racing company Formula One has delayed its Singapore initial public offer worth up to $3 billion due to weak markets.
The undersea cable unit IPO is crucial for Reliance Communications, which has been trying to raise about $3 billion by selling its telecoms tower assets but has so far been unsuccessful.
In May, a year after the company received offers for the tower business, the company said potential suitors were awaiting clarity on government rules for the telecoms sector before they went ahead with a deal.
Reliance Communications plans to sell 75 percent of the wholly-owned undersea cable unit, which a person with direct knowledge of the transaction said would be listed as Global Telecommunications Infrastructure Trust.
Reliance is also looking to approach cornerstone investors before the launching the public offer.
Deutsche Bank, Standard Chartered, DBS and Industrial and Commercial Bank of China are the advisers for the public offering of shares.
Copyright Thomson Reuters 2012