* Carrefour shares initially rise but then fall back
* Brazilian IPO valuation seen in line with forecasts (Adds comments from analysts, updates shares)
PARIS, June 29 (Reuters) - Carrefour shares surrendered gains made earlier on Thursday as initial investor optimism over the retailer's $1.7 billion initial public offering (IPO) for its Brazilian business fizzled out.
Carrefour, the world's second-largest retailer behind Wal-Mart, said it would list the Brazil arm on July 20 on the Sao Paulo exchange with a 15-20 percent free float and an indicative price tag of 15 to 19 reais per share..
This would give the overall Brazilian business an equity value of 7.9 billion to 10 billion euros, compared to market estimates of around 9 billion euros, analysts said.
Carrefour shares initially rose but then lost ground to stand 0.6 percent lower by mid-session trading, with analysts signalling that the valuation of the Brazilian business had failed to beat earlier market forecasts.
"We are valuing Carrefour Brazil at 9 billion euros or 8 times EV/EBITDA (enterprise value to earnings before interest, tax, depreciation and amortisation), so do not see the valuation range as surprising," said Deutsche Bank analysts in a note, keeping a "hold" rating on Carrefour shares.
Analysts at Bernstein, who kept a "market perform" rating on Carrefour, also said that much of the impact from the Brazilian IPO had already been factored into Carrefour's stock price.
"The potential upside from the IPO, at the current indicative range, is in our view in the Carrefour share price already. The lower end of the range might worry investors as that would be well below expectations," they wrote.
Bernstein analysts said that pricing at the top of the indicative range would add 0.8 euros to its 'Sum Of The Parts' (SOTP) price for Carrefour, while an IPO at the bottom part of that range would remove 1.2 euros from that price.
Carrefour had already flagged that it was targeting the Brazilian IPO this year in order to accelerate its expansion in that country, which is its second-largest market after France.
Deutsche Bank expects the IPO proceeds to strengthen Carrefour Brazil's balance sheet "by reimbursing gradually between 500 million and 1 billion euros of intercompany debt with Carrefour," and help fund possible acquisitions in Brazil.
Carrefour added that because of the Brazilian IPO, it was bringing forward its second-quarter sales figures to July 6 from July 12. It will release first-half earnings on August 30. (Reporting by Sudip Kar-Gupta; Editing by Dominique Vidalon)