New Delhi: Debt intruments worth Rs1,200 crore of India’s biggest real estate firm by revenues, DLF Ltd, has been downgraded by Fitch Ratings Inc.from F1+—the agency’s top rating for short-term debt—to one notch lower at F1, which still indicates “strong capacity" of the borrower to meet obligations.

Lowered rating: The DLF Ltd office in New Delhi. Ramesh Pathania / Mint

The downgrade applies to 10 tranches of what are called ‘single loan sell down transactions’ that refer to debt that is securitized by selling it to other buyers as certificates.

Fitch, a top global ratings agency along with Moody’s Corp.and Standard and Poor’s, said in a statement that the revision of DLF debt reflects the company’s reduced liquidity position, which is driven by the current slowdown in realty and significant receivables from DLF Asset Ltd(DAL), a firm owned by DLF promoters established to buy and hold completed commercial assets of the developer.

DLF’s current liquidity is comfortable, with cash and bank balances of Rs1,332 crore on 30 September. “However, liquidity risks could increase in the event of delays in the receipt of payments from DAL and in light of the reduced risk appetite of banks and financial institutions generally, in lending to the sector," Fitch said.

DLF executives were not immediately available for comment.

Fitch said DLF is looking to raise significant funds at DAL in the next threesix months. The company is also looking at raising additional debt from banks through lease rental discounting and sales discounting of sold properties. The company faces maturities of some Rs6,500 crore during 2009 .

Fitch expects that DLF’s margins, credit management and cash flow will continue to be under pressure, as the housing environment remains difficult.

Shares of DLF closed 1.96% stronger at Rs182 on the Bombay Stock Exchange, whose benchmark index was weaker by 1.14%. The 14-stock realty index on the bourse went up 2.13%.