Italian fashion house Prada plans to use most of the proceeds from its Hong Kong initial public offering on expansion and renovation of its stores over the next 18 months as the company bets on increasing demand for luxury products in China and the rest of Asia.

Milan-based Prada, known for its handbags and Miu Miu dresses, plans to sell 423.3 million shares, equivalent to 16.5 percent of its enlarged capital, according to a term sheet of the deal seen by Reuters on Wednesday.

The IPO has been valued at around $2 billion.

About 14 percent of the shares will be sold in a primary offering with proceeds going to Prada, while 86 percent will come in a secondary offering from shareholders Prada Holding BV and Intesa Sanpaolo .

The IPO could be raised by 63.5 million shares, all from Prada Holding BV, if underwriters exercise a greenshoe option to meet demand for the stock.

The offering is slated to be priced on June 17, with listing on the Hong Kong stock exchange set for June 24.

(Reporting by Fiona Lau; Writing by Elzio Barreto; Editing by Lincoln Feast and David Holmes)