City analysts are sceptical of online grocer Ocado's plans to sell more than 257 million shares in an initial public offering (IPO), which would value the company at up to £1.2bn on the stock market, later this month.

The retailer confirmed plans to raise £200m by the flotation despite analysts' doubts over the valuation and timing of the IPO.

Bankers working on the float for Ocado - which has not made a profit since it was founded in 2000 - include Goldman Sachs, UBS and JPMorgan. The advisers stand to make £15m in fees, as they aim to sell the shares in the price range of 200p to 275p a share.

The retailer, which sells groceries from Waitrose to internet customers, says the purpose of the float is to raise the cash required to expand its operations beyond the existing automated distribution facility in Hatfield, Hertfordshire.

Only institutional investors, Ocado employees, and those customers who have spent more than £300 since the start of this year, are eligible to buy the shares.

Ocado's prospectus warns that the company does not "anticipate declaring or paying a dividend in the foreseeable future", suggesting that the company is a high-risk investment for small investors.