Reputed to be the richest man in the world, the last nizam of Hyderabad lived like a miser.

The ruler of the largest and most populous princely state on the Indian subcontinent ate simple meals from tin plates and wore the cheapest pajamas from the bazaar, while an untold fortune in gems lay strewn like lumps of coal across the cellar floor of his palace.

Twelve years after his death, a small portion of that gem collection will be sold here Thursday in what is being billed as the world's highest-priced jewel auction.

Bidding on the 37 items will start at $25.4 million -- the down payment that must be deposited by Monday in order to inspect the collection in a Bombay bank vault Wednesday and take part in the sale.

So far, two bidders have put up the money: Greek shipping magnate Stavros Niarchos and a Dubai banker named Abdul Wahab Gal Adhari, who says he is acting for a sheik from the oil-rich United Arab Emirates.

But Ram N. Malhotra, the Indian Finance Ministry official who is running the auction in his position as chairman of the trust that owns the gems, said half a dozen others -- including some from the Middle East, Hong Kong and Malaysia -- have expressed interest in buying into the auction.

Among the 37 items included in the sale is a collection of 22 high-quality emeralds totaling 414 carats, in a box that once belonged to Czar Nicholas II, and a 200-carat, peach-size emerald on a diamond-studded gold penant.

It is winner take all, with all the jewels being sold as one lot.

In the auction catalog, the descriptions of the jewels are amazingly sparse. But few adjectives are needed. The weights of the stones speak for themselves.

There is a diamond and gold buckle "encrusted with [a] center diamond of 40 carats, four side diamonds [of] 70 carats, 40 big diamonds [of] 200 carats, 15 big diamonds [of] 45 carats, 36 diamonds [of] 50 carats and small diamonds [of] 150 carats. There is also a diamond broach with a 25-carat center diamond, a 75-carat emerald ring, a pendant with a 125-carat emerald, a 100-carat emerald and 42 small diamonds totaling 35 carats."

These are only a small part of the nizam's collection, which was so vast that the pearls alone reputedly could have covered the sidewalks of London's Picadilly Circus.

The jewels make up part of the network of trusts set up by the nizam before he died in 1967 to benefit his thousands of dependents, including retainers, the women in his harem, and their legitimate and illegitimate children.

The gems being auctioned Thursday are just one-third of a collection held by one trust, which benefits about 40 members of the nizam's family.

Part of that collection -- but not for sale under government decree because it is considered a national treasure -- is the 184-carat Jacob's Diamond. The last nizam kept it wrapped in newspapers on his desk, where he used it as a paperweight.

No one is exactly sure what other treasures remain in this jewelry trust or any of the other ones. Malhotra said he was surprised by the lack of records -- a lack that stems in part from the fact that nizam was a secretive ruler and partly because many of his nawabs (princes) and retainers looted the royal treasury before the Indian government sealed it at the time of his death.

Adding to the air of intrigue is the manner in which this auction was forced on the trustees by a few of the beneficiaries, who said the sale held in March 1978 drew too low bids because it was restricted to Indians. India's Supreme Court agreed and ordered a new auction to advertised around the world.

The auction 18 months ago raised about $19 million for the nizam's heirs. But one of them, Prince Nadar Ali Mizra, said the jewels are worth more than $50 million. The 22 emeralds in a box, which sold for $8.5 million last year, could be worth $13.5 million, experts here say.

The chief beneficiaries from Thursday's sale will be two grandsons of the late nizam, Mukaram Jab, 50, and his brother, Muquafama Jah, 45, who spend most of their time in Australia or visiting London. They each own a one-fourth interest in the trust from which the jewels are being auctioned.

While the Jah brothers are well off, some of the other 40 to 50 beneficiaries are not. One was described as existing on pennies a day in the slums of Old Delhi.

In recent years the trusts have been eaten up to pay taxes that the government of India had levied on the nizan's wealth.

But the beneficiaries will not be given the money from the auction Malhotra said. Instead, it will be invested in 7 1/2 percent government rural development bonds to avoid a capital gains tax on the proceeds, and the interest will be distributed to the beneficiaries. CAPTION: Picture 1, STAVROS NIARCHOS . . . bidding for treasure; Picture 2, The late nizam's bejeweled jubilee robes included a pearl and diamond headdress costing well over $100,000, Photo by AP.