There is huge potential in India

Shares in the firm have already seen huge rises since news in January of an oil discovery in Mangala field located in Rajasthan in north-west India.

The latest discovery however is thought to be not as big as the first.

The company has also announced a 58% rise in annual profit to a record �46.3m, amid soaring production.

Indian opportunity

The Mangala field has an estimated 450 million to 1,100 million barrels of oil and potential reserves of between 50 million to 200 million barrels.

The finds "were look-alikes, but now we can see the second one is not going to be as big," said analyst Peter Hitchens of brokerage Cheuvreux.

In India they only produce around 600,000 barrels a day and import around 1.5 million... that's a great incentive for us to develop and produce as much oil as we can Bill Gammell, chief executive Cairn Energy Check out Cairn's latest share price

"I reckon the first discovery is worth about �2 or �2.50 a share. This one's worth about �1 a share."

Cairn said it expected to have sufficient funds to develop the fields without recourse to shareholders, but planned to use all available net cash and perhaps some loans.

Cairn has evolved from a small company operating in the North Sea into one of Britain's leading independent international oil exploration and production companies with a focus on India and Bangladesh.

The company's chief executive Bill Gammell said the Mangala field alone could produce 50,000 barrels a day.

"In India they only produce around 600,000 barrels a day and import around 1.5 million," he said.

"That's a great incentive for us to develop and produce as much oil as we can in Rajasthan."

Cairn's exploration licence expires in May 2005.