By Christoph Steitz, Tom Käckenhoff and Neha Arora

FRANKFURT/DUESSELDORF/NEW DELHI, Jan 7 (Reuters) - Germany's Thyssenkrupp could sell its steel division to India's Jindal Steel International in several steps, four people familiar with the talks said, as the two sides try to strike a deal for the complex business.

Jindal Steel has been conducting due diligence on Thyssenkrupp Steel Europe (TKSE) since October after making an indicative bid for Europe's second-largest steelmaker. The deal is key for Thyssenkrupp as the submarines-to-car parts group seeks to become leaner and more focused.

One option under discussion would see Jindal take a majority stake in TKSE, likely 60%, in a first step, with the remaining 40% acquired later in two 20% tranches or in one go, depending on progress in restructuring, the people said.

A phased transaction would give Thyssenkrupp more flexibility to address about 2.5 billion euros ($2.9 billion) in pension liabilities tied to TKSE - a major hurdle in previous sale attempts, one of the people said.

Details of how a gradual takeover could be structured and its impact on debt obligations have not previously been reported. Due diligence is ongoing and terms could still change, the people said.

Shares in Thyssenkrupp rose as much as 4.9% to the top of Frankfurt's midcap index following the Reuters report, with one trader saying a sale of TKSE was "getting more concrete after years of finding no buyer".

JINDAL STEEL DELEGATION SET FOR JANUARY VISIT TO GERMANY

A sale of TKSE would end years of efforts to find a buyer for an asset that, while central to Germany's industrial heritage, has been volatile and costly to run amid tougher Asian competition.

For Jindal Steel International, the international steel arm of the Naveen Jindal Group, it would mark a major expansion into Europe after buying smaller Czech peer Vitkovice Steel in 2024.

Thyssenkrupp said in a statement that all aspects of the transaction - including valuation, obligations and future investments - would be discussed during due diligence and any contract talks.

"We cannot comment on individual statements, which at this stage can only represent an interim status," it said.

Jindal Steel International had no immediate comment.

A second source said a Jindal delegation was scheduled to visit Germany in January for a technical review of TKSE's Duisburg plant, after a planned December trip was postponed.

A phased takeover would also keep Thyssenkrupp involved in TKSE's restructuring, a third source said.

Thyssenkrupp CEO Miguel Lopez said last month that Jindal Steel was an optimal fit for TKSE, adding that a sweeping restructuring plan to cut jobs and capacity had prompted the Indian group's interest.

Lopez said Thyssenkrupp still had a plan B if talks with Jindal Steel International fail, without giving details.

($1 = 0.8538 euros)

(Reporting by Christoph Steitz, Tom Kaeckenhoff and Neha Arora. Additional reporting by Aditya Kalra. Editing by Adam Jourdan, Mark Potter and Alexander Smith)