Differences over infusing fresh capital into Vishal Retail have soured relations between joint owners TPG Capital and the Shriram Group to such an extent that the two have started discussing a split and division of assets. The deterioration comes barely six months after the two jointly acquired the debt-laden discount store chain.

Shriram has expressed its inability to bring in more money, which has led to both companies exploring an amicable split.

At a meeting earlier this month, Shriram said it could not honour a commitment to infuse funds into Vishal Retail since its financial arm Shriram Capital was hit by a slowing economy and rising interest rates.

As regulations do not permit overseas companies to invest in retail ventures, TPG and Shriram had entered into an agreement to divide Vishal Retail?s businesses at the time of acquisition. While US-based private equity firm TPG acquired the back-end business ? where India allows fully-owned foreign subsidiaries ? Shriram inherited the front-end stores.

If the separation happens, Shriram will run the stores independent of TPG Wholesale Pvt Ltd that was supplying merchandise to the stores run by the Chennai-based Shriram, the person quoted above said.

TPG has expressed its desire to operate a cash-and-carry unit that plans to supply to other retailers and businesses, according to the person.

Amol Jain, director of TPG Capital, declined to comment when asked about the latest row between the partners. A Shriram Capital spokesperson could not be contacted as he was travelling. When contacted, a senior director in the company declined comment.

In March, TPG and Shriram jointly paid Vishal Retail promoter Ram Chandra Agarwal R70 crore to acquire the debt-hobbled discount retailer capping months of a corporate debt restructuring (CDR) process after it failed to service R730-crore debt.

At the time of acquisition, TPG had said that it plans to infuse R200 crore into Vishal Retail. Both TPG and Vishal inherited Vishal Retail?s assets and liabilities jointly and the alliance has been making efforts to bring the troubled retailer back to financial and operational health. For that, Vishal Retail was in need of fresh injection of funds that Shriram refused, the person said.

Like many of its peers, Vishal Retail was badly hurt by the economic slowdown in late 2008 and its debt soared amid mounting inventory of hundreds of crores of rupees. Eventually, lenders including State Bank of India, HDFC Bank and ING Vysya Bank among others agreed on a CDR that eventually sold the assets of the company to TPG and Shriram.