The fall for the exploration arm of the British-based Cairn Energy came as investors feared that a dispute over construction of a pipeline from its oilfields in Rajasthan could delay sales of crude.

Analysts also attributed the fall to an overvaluation of the initial public offering (IPO), which raised $1.92 billion (£990 million), making it one of the largest in India.

The shares opened at 0148 rupees (172p), well below the offer price set last month of 160 rupees, as investors passed on the chance to buy into the first foreign oil exploration company to go public in India. They closed down more than 14 per cent at 137.50 rupees.

The biggest concern for investors is the apparent lack of a clear plan to transport oil from the fields to the refinery, which could knock Cairn India off its production timetable starting in 2009.

The explorer says that a 311-mile pipeline costing 20 billion rupees is to be built by Oil & Natural Gas Corp (ONGC), but the state-owned company has said that it will do so only if Cairn shares the costs or agrees to sell crude from the fields at a discount.

Rahul Dhir, Cairn India’s chief executive, insisted that the production timetable would be protected and that the issue would be resolved by the middle of the year. “We are an Indian company in the business of creating shareholder value. We are ready to commence construction work in Rajasthan for production in 2009,” he said. “Short-term market fluctuations will continue and not deter our goals.”

Cairn India, which is 69.5 per cent-owned by Cairn Energy, expects oil output from its Rajasthan fields to reach 150,000 barrels per day (bpd) by 2009, a peak that may be sustained for up to a decade. The company produces 51,000 bpd from the fields at present, with estimated reserves of 3.5 billion barrels and recoverable reserves of 820 million barrels. It is expected to produce 20 per cent of India’s domestic oil by the end of the decade.

“Cairn India is on track to deliver a near-five times increase in production by 2010, while maintaining a cost base of around ten dollars per barrel,” Lawrence Symth, its chief operating officer, said.

Despite a 9 per cent dip in crude prices since the start of the year, which may have affected the flotation, analysts expect global oil prices to hold at about $60 a barrel.

Sir Bill Gammell, Cairn Energy’s chief executive, said: “I am delighted that we have been able to achieve our strategic goal of creating an autonomous business and management team for our world-class assets in India. I firmly believe that the Indian listing will create enhanced opportunities for Cairn, Cairn India, their respective shareholders and other stakeholders in the future.”

The company also raised $755.6 million in a pre-IPO placement of 12 per cent, mainly to Petronas. The original sum was $822 million, but the Malaysian state oil company had the option to pay less if the IPO was priced lower.

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