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Sources close to the filmmaker have said that Varma is in the process of scripting the film. He met the late smuggler's wife Muthulaxmi to discuss the storyline.
The film will be directed by Prashant Pandey, who wrote Varma's latest release Sarkar Raj.
The film will dwell on how Veerappan grew to be a cunning and monsterous outlaw and the men in uniform who were after him and finally killed him, sources added.
The filmmaker is planning to cast newcomers for this project, sources added.
Varma is presently busy with the post-production of his next releases Contract and Phoonk scheduled for release in July and August respectively.
