HONG KONG (Reuters) - Chinese startup Ofo is in talks to raise $1 billion (764.12 million pounds) in a new funding round led by Japan's SoftBank Group (>> SoftBank Group Corp), people familiar with the matter said, in what would be the largest fund-raising in the nation's bike-sharing business.

Didi Chuxing, China's biggest ride-hailing firm which counts SoftBank as an investor, could join Ofo's new fundraising round，the sources told Reuters. Ofo could reach a valuation of close to $3 billion after the funding, one of the sources said.

Ofo and Mobike, China's two largest bike-sharing startups, each has raised over $1 billion since late last year in a cash war to expand market share at home and overseas.

Ofo is seeking fresh capital less than a month after raising more than $700 million from investors led by Alibaba Group (>> Alibaba Group Holding) and two others, following rival Mobike, which in June announced a $600 million investment led by Tencent Holdings (>> Tencent Holdings Ltd).

The latest Ofo investment plan has not been finalised, the sources said, who declined to be identified as the discussions are private.

SoftBank and Didi declined to comment. Ofo didn't immediately respond to Reuters' request for comment.

Ofo did not disclose its valuation in the last funding round. Dai Wei, Ofo's founder and CEO, had said in April the firm was valued at upwards of $2 billion.

Mobike's valuation reached around $2.7 billion-$3.0 billion after the June funding round, according to three sources close to the startup. And it is also open to raising new money, one of them said.

Mobike declined to comment.

Ofo said earlier this month it plans to deploy 20 million bikes and expand its service to 200 cities in 20 countries by the end of 2017. It said it "has connected over 6.5 million bikes to riders in 150 cities across five countries, generating more than 25 million transactions daily."

Mobike has said it has over 5 million bikes in more than 100 cities in the world. The company said on Wednesday it would start offering bike rides in Italy.

The rapid fundraising and broad expansion plans of the bike-sharing companies are worrying some investors.

"We hope they (the recent funding rounds) wouldn't lead to endless bike piling and price competition," said a venture capitalist who invests in China's bike-sharing apps and could not be named because he was not authorised to speak to the media.

China currently has at least 10 operational bike-sharing apps. Local regulators have raised concerns that bikes could add to congestion on the streets. The bikes are also easily stolen or vandalised, adding extra costs to the companies.

DIDI'S INFLUENCE

Didi, already an investor in Ofo, has been increasing its influence at the company. Three of its senior executives joined Ofo this week, according to local media.

Ofo told local media on Wednesday it had named Fu Qiang, a former senior vice-president of Didi, executive president of the company but did not confirm the hiring of the other two.

For SoftBank, which recently launched a near $100 billion technology fund, an investment in Ofo would be another bet on China's sharing-based economy that has already attracted billions in venture capital.

The Japanese conglomerate in May agreed to invest $5 billion in Didi, putting an over $50 billion valuation on the Chinese company.

(Reporting by Kane Wu and Julie Zhu; Additional reporting by Sijia Jiang in HONG KONG and Makiko Yamazaki in TOKYO; Editing by Muralikumar Anantharaman)

By Kane Wu and Julie Zhu