Internet grocer Ocado's plans for a £1bn flotation have come under fire by an independent research group, which said the company could be worth as low as £400m.

A report by Edison Investment Research has warned investors off the firm, saying Ocado desperately needs more funds "to support a highly capital-intensive business model".

The valuation recommended by the research analyst is 60 per cent less than that put on the business by the online retailer's management.

Ocado wants to raise £400m from investors, with the company's directors hoping to sell shares at 200p-275p.

Several analysts and investors, however, have said the business is overvalued.

Edison has been critical of the company's lack of assets, saying the business was vulnerable to other supermarkets choosing to open online operations.

Although Ocado could generate £2bn in sales a year by 2013 upon receiving the funding and increasing capacity - which would justify the high valuation, the researcher said that "risk-adjusted and discounted to today, £400m-£650m seems fairer".

Ocado has not made a profit since being founded by three former Goldman Sachs bankers in 2002.