Diageo is reported to be trying to buy a 15% stake from Vijay Mallya, the man behind the Force India Formula One team and Kingfisher Airline, and 10% from other shareholders.
Mr Mallya, chairman of United Spirits, has been under pressure to raise capital to put into his airline.
United Spirits and Diageo held unsuccessful talks in 2009.
In a short statement to the London Stock Exchange, they warned that there was no certainty that a deal would be reached this time either.
Shares in United Spirits have more than doubled in 2012 and rose by 2.4% on Tuesday.
Diageo shares also rose on the news.
There has long been speculation that Mr Mallya would sell part of his stake in either United Spirits or United Breweries, which makes Kingfisher beer, to raise money for his airline.
Meanwhile, Diageo, which is the world's biggest spirits group, is keen to acquire a stake in India's spirits market.
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