The Indian government's attempt to sell a 5% stake in the Oil and Natural Gas Corporation (ONGC) fell slightly short of expectations amid concerns that shares were over-priced.
It had offered 428 million shares at a price of 290 rupees each, hoping to raise 124bn rupees ($2.5bn; £1.6bn).
It received offers for 98% of the shares on sale.
Analysts said the government may have to reconsider how and when it offloads its stakes in major firms in future.
"It will be a huge disappointment for the government that the issue was not fully covered, and this will lead to a lot of rethinking on the privatisation drive in the near-term," said Juergen Maiar, a fund manager with Raiffeisen Euroasien Aktien.
ONGC is India's largest oil producer and has been expanding its operations. It has increased its fields by a count of 15 in the current financial year.
Its business is expected to grow further as demand for oil in India continues to rise as its economy expands.
These factors had raised expectations that the share sale would generate a lot of investor interest.
Analysts said that although the company was an attractive investment, the pricing of its shares had kept many potential buyers at bay.
The offer price of 290 rupees was 2.3% higher than ONGC's closing price on 28 February.
"I think greed played out here. This should be one of the lessons... not to try and price the offering at a premium, especially when a reference point is available in the market price," said Ambareesh Baliga, chief operating officer of Way2Wealth Securities.