Indian billionaire Agarwal to buy bigger stake in Anglo American

* Anglo American (LSE: AAL.L - news) 's shares up more than 11 pct this year

* Stake could rise to 20 percent (Adds background)

LONDON, Sept 20 (Reuters) - Volcan Investments, the family trust of the chairman of diversified miner Vedanta, on Wednesday said it was increasing its stake in Anglo American but did not intend to make a bid for the entire company.

In a statement, Volcan said it was increasing its stake by acquiring shares worth between 1.25 billion ($1.69 billion) and 1.5 billion pounds, in addition to the 2 billion pounds spent in March on acquiring a 12.43 percent holding.

The additional shares could take the stake up to 20 percent over the next 10 days, a banking source who declined to be named said.

Anglo American declined to comment.

Following a recovery on the commodity markets, Anglo American's shares have risen by more than 11 percent this year, building on a nearly 300 percent rally last year, which led gains on the London stock market.

"We are encouraged by the performance of Anglo American since our original investment earlier this year," Volcan said in a statement, adding it remained "an attractive investment for our family trust".

Anil Agarwal has previously stated he has no plans to take over Anglo American, although his family trust is now the second biggest stakeholder after South Africa's state-owned Public Investment Corporation.

($1 = 0.7375 pounds) (Reporting by Barbara Lewis and Clara Denina in London and Sanjeeban Sarkar. Editing by Jane Merriman)