Netsol Tech Inc (NTWK)

®
COMPANY UPDATE Joe Giamichael
212-920-3593
jgiamichael@rodm.com
TECHNOLOGY Dmitriy Shapiro
212-430-1767
ds@rodm.com

December 21, 2009 Market Outperform / Speculative Risk

NTWK Raises FY10 Guidance on Improving Outlook; Reiterate Outperform and $2.50 P.T.

MARKET DATA Intraday - 12/21/2009 Today, December 21, 2009, NetSol Technologies raised its financial
Price $0.92 guidance for FY 2010 as a result of growing demand for its core NetSol
Market NASDAQ Financial Suite software business. The Company expects to generate
Target Price $2.50 revenues of $33mm to $35mm for the full year 2010, corresponding to a
52 Wk Hi - Low $1.31 - $0.21 25% to 32% Y/Y growth over FY 2009. The main reason behind the
EV(MM) $44.9 robust Y/Y revenue growth is the renewed strength in NetSol’s licensing
Market Cap(MM) $31.8 sales, which are projected to grow by over 100% Y/Y. This reflects the
Shares Out (MM) 31.6 ramping of new purchasing decisions among existing and new potential
Public Mkt Float (MM) 31.4 customers, primarily coming from the Asia Pacific region and especially
Avg. Daily Vol (000) 175.1
China. The anticipated growth in revenues, combined with the cost
BALANCE SHEET METRICS efficiency measures and corporate restructuring activities completed in
Cash (MM) $4.0
recent quarters, should allow the Company to return to GAAP profitability
LTD (MM) $7.8 in its bottom line. This should be a significant improvement from the
Total Debt/Total Equity 44.10% $(0.30) loss per share reported in FY 2009.
Debt/Capital 30.6%
Price/Book Value $0.8
Book Value/Share $1.22
In addition to these operational improvements and organic growth, the
company is involved in participating in several potential “game changing”
EARNINGS DATA ($) project bids. Our current estimates and our valuation methodology do not
FY - Jun 2008A 2009E 2010E incorporate this, but they should be viewed as potentially exciting and
Q1 (Sep) 0.08 0.04 (0.01) highly accretive opportunities if NetSol is to be successful in the bid
Q2 (Dec) 0.04 (0.12) 0.01E process. In terms of back of the envelope scale and scope of these
Q3 (Mar) 0.09 (0.19) 0.02E opportunities and award on the military side could add several multiples
Q4 (Jun) 0.08 (0.03) 0.03E of earnings value to the existing estimates and would likely result in a
Full Year EPS 0.29 (0.30) 0.04E material increase to shareholder value.
Enterprise 1.8 1.4E 1.2E
Value/EBITDA
Price/Earnings 4.9 3.5E 2.7E NetSol, like many other micro cap companies, struggled to right size the
business in the face of the severe economic downturn starting in late
INDICES 2007. Management has been aggressive in both reducing costs as well
DJIA 10,445.5 as using the downturn as a marketing opportunity to sell the value
SP-500 1,115.5 proposition that NetSol’s low cost solutions provide. Given the numerous
NASDAQ 2,235.6 contract announcements over the past several months it looks like the
Russell 2000 616.9 Company has turned the corner. Recent news flow indicates that despite
1 Year Price History the prolonged difficult environment the Company continues to grow and
2
diversify its business, which should generate significant benefits to
Netsol’s revenues and profitability in the future (Please see Figure 1
1 below for the recent news announcements).
0
Q1 Q2 Q3
2009
6
5
Maintain Market Outperform Rating and $2.50 Price Target
4
3
2
1
0
Created by BlueMatrix

For definitions and the distribution of analyst ratings, and other disclosures, please refer to pages 4 - 5 of this report.
Netsol Tech Inc December 21, 2009

Figure 1: Recent News and Contract Announcements

December 9, 2009 -- NetSol announced that the company was awarded a major software and IT services contract with a new
joint venture auto finance company based in China. Under the terms of the contract, NetSol will provide full life-cycle
processing for the customers' auto finance business through the NetSol Financial SuiteTM (NFS). NetSol's NFS solution
provides asset finance companies a state-of-the-art tool to manage business process, work flow framework as well as
complete portfolio management and processing. The value of the contract is in excess of $2 million over the life of the
agreement, including customization, implementation, maintenance and support.
December 8, 2009 -- NetSol announced that the company has started the process to form a wholly owned subsidiary in China.
To date, NetSol has been operating from its representative office in Beijing.
November 18, 2009 -- NetSol announced the signing of an Independent System Review (ISR) and Testing Services contract
with BMW Group Financial Services - Asia Pacific region. The contract calls for the comprehensive testing of a newly
developed financial application suite to be deployed in more than eight countries in Asia Pacific and South Africa. The project
is the second in a series of contracts signed by NetSol's ISR services group with BMW after the successful delivery of ISR
services to BMW Group Financial Services Japan last year.
October 28, 2009 -- NetSol announced that it has secured a significant follow on contract fee from Toyota Motor Finance
China. The additional NetSol Financial Suite (NFS) license fee is attributed to the rapid growth in Toyota Motor Finance's
business portfolio volume in the Chinese market, which in turn triggered the additional license upgrade for the NFS Credit
Application Processing System (CAP) and Contract Management System (CMS). The agreement also calls for additional
ongoing maintenance revenue to support the expanded license base.
October 22, 2009 -- NetSol announced that NetSol Asia Pacific was awarded a new IT Services contract by Atheeb Intergraph
Saudi Company (AISC) of Saudi Arabia. The project is related to application development for AISC and further strengthens
NetSol's presence in the Middle East market. This project was facilitated by Atheeb NetSol Ltd., the recently announced joint
venture between Atheeb Trading Company and NetSol Technologies, Inc.
Oct 19, 2009 -- Netsol announced that the company was awarded a major software and IT services contract with a United
Kingdom based bank. Under terms of the contract, NetSol will provide full life-cycle processing for the bank's Asset Finance
Division through the NetSol Financial Suite (NFS) and Electronic Data Interchange (EDI) platforms, including Data
Warehousing and Business Intelligence. The value of the contract is in excess of $1 million over the life of the agreement,
including implementation, maintenance and support.
Oct 15, 2009 -- Netsol announced that the company has been awarded a significant contract for Information Security Services
with a leading IT solution integrator in Pakistan. Under the terms of the agreement, NetSol will provide the customer an IBM-
ISS based information security solution to protect strategic data centers of the client against cyber security threats. The
deployment of this solution is expected to be completed in approximately 3 months time.

Adjusting Our Estimates

In light of today’s guidance issued by the Company, we are raising our current estimates. We now expect the Company to
report revenues of $33.6mm and $43.2mm for FY10 and FY11, compared to our prior estimates of $31.5mm and
$40.1mm, respectively. In addition, our new EPS estimates have been revised upward; we now expect NTWK to report
FY10 and FY11 EPS of $0.04 and $0.22, above our previous estimates of $0.03 and $0.19.

Maintain Market Outperform Rating and $2.50 Price Target

Based on our adjusted estimates and today’s intraday price of $0.92, shares are trading at 4.3x FY 2011 P/E and 3.8x FY
2011 EBITDA estimates, significantly below the peer group’s respective averages of 14.5x and 9x. Our price target of
$2.50 is predicated on 11.6x FY 2011 P/E and 7.9x FY 2011 EV/EBITDA multiples. Please see Figure 2 below for the full
peer valuation analysis. In our opinion, these valuation metrics more closely align the Company with its peer comparables.

Figure 2: Peer Valuation Analysis

Name Ticker Rating Price Market Value EV P/E P/E P/E EV/EBITDA EV/EBITDA EV/EBITDA
2009 2010 2011 2009 2010 2011
INFOSYS TECHNOLOGIES LTD INFY Not Rated $54.38 $31,176.5 $29,301.2 24.6 22.5 18.8 18.5 16.6 14.2
INTL BUSINESS MACHINES CORP IBM Not Rated $128.59 $168,912.6 $178,703.6 13.0 11.8 11.1 7.8 7.3 6.8
WIPRO LTD WIT Not Rated $22.44 $32,881.5 $33,136.3 34.9 31.2 27.7 26.9 24.1 21.0
ORACLE CORP ORCL Not Rated $24.28 $121,669.6 $115,637.6 15.5 14.0 12.8 9.8 8.9 8.3
APAC CUSTOMER SERVICES INC APAC Not Rated $5.40 $281.4 $265.3 8.7 8.6 NA 5.8 5.1 NA
CONVERGYS CORP CVG Not Rated $10.99 $1,351.4 $1,608.9 9.8 9.6 8.5 8.5 5.1 4.8
ICT GROUP INC ICTG Not Rated $16.52 $265.6 $216.9 49.6 26.0 #N/A 7.4 5.8 NA
STARTEK INC SRT Not Rated $6.51 $96.8 $75.9 18.7 11.9 9.2 3.2 2.5 2.3
TELETECH HOLDINGS INC TTEC Not Rated $18.68 $1,164.3 $1,049.4 15.8 15.2 13.5 6.3 6.1 5.8
SAP AG SAP Not Rated $46.98 $57,597.3 $56,209.3 18.7 16.0 14.3 11.6 10.0 9.1
AVERAGE $41,539.7 $41,620.4 20.9 16.7 14.5 10.6 9.2 9.0

NETSOL TECHNOLOGIES INC NTWK Outperform $0.92 $31.8 $44.9 NA 20.6 4.3 NA 5.4 3.8

Multiples with Price Target $2.50 79.1 92.2 NA 55.9 11.6 NA 11.1 7.9

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Netsol Tech Inc December 21, 2009

NetSol Technologies Inc.

Income Statement
All Figures $MM, except per share FY 2005a FY 2006a FY 2007a FY 2008a Q1 9/08a Q2 12/08a Q3 3/09a Q4 6/09a FY 2009a Q1 9/09 Q2 12/09 Q3 3/10 Q4 6/10 FY 2010 FY 2011
Total Revenue 12.4 18.7 29.3 36.6 9.3 5.3 5.0 6.9 26.4 7.6 7.9 8.4 9.7 33.6 43.2
% growth year-to-year 50.3% 57% 25.1% 7.5% -37.3% -44.6% -34.8% -27.8% -18.1% 49.9% 67.1% 41.3% 27.0% 28.5%
Cost of Goods Sold 4.8 9.0 13.7 15.7 4.6 3.8 4.5 4.3 17.2 3.6 3.9 4.0 4.5 15.9 18.3
% of Revenue 48.3% 46.8% 42.9% 49.1% 72.9% 89.3% 62.8% 65.0% 46.7% 48.8% 47.4% 46.6% 47.4% 42.4%
% growth year-to-year 51.8% 14.8% 34.9% 6.2% 12.6% -9.1% 9.4% -22.1% 0.3% -11.2% 5.0% -7.5% 15.1%
Gross Profit 7.7 9.7 15.6 20.9 4.7 1.4 0.5 2.6 9.2 4.1 4.0 4.4 5.2 17.7 24.9
% of Revenue 61.8% 51.7% 53.2% 57.1% 50.9% 27.1% 10.7% 37.2% 35.0% 53.3% 51.2% 52.6% 53.4% 52.6% 57.6%
% growth year-to-year 25.9% 61.2% 34.2% -10.1% -70.2% -89.4% -55.9% -55.8% -14.1% 183.3% 718.2% 102.5% 91.2% 40.6%
Selling, General & Admin Expenses 6.6 9.9 12.9 13.7 3.6 4.2 4.8 3.1 15.7 2.9 3.3 3.4 3.8 13.4 17.2
% of Revenue 53.2% 53.1% 44.2% 37.4% 38.7% 80.5% 95.5% 45.1% 59.5% 38.3% 42.0% 40.6% 39.3% 40.0% 39.9%
% growth year-to-year 50.0% 30.3% 5.9% 18.3% 27.1% 44.6% -22.9% 14.8% -19.1% -21.9% -28.9% 23.2% -14.5% 28.1%
Operating Income 1.1 (0.3) 2.6 7.2 1.1 (2.8) (4.3) (0.5) (6.5) 1.1 0.7 1.0 1.4 4.2 7.6
% of Revenue 8.6% -1.4% 9.0% 19.7% 12.1% -53.4% -84.8% -7.8% -24.5% 15.0% 9.2% 12.0% 14.1% 12.6% 17.7%
% growth year-to-year -124.4% -1120.6% 172.4% -49.2% -294.6% -341.2% -130.2% -189.9% 1.6% -125.8% -123.6% -353.4% -165.4% 80.3%
Interest Expense (0.2) (0.4) (0.6) (0.6) (0.2) (0.3) (0.5) (0.3) (1.3) (0.5) (0.5) (0.5) (0.5) (1.9) (1.6)
% of Revenue -1.7% -2.4% -2.1% -1.7% -2.2% -5.6% -9.6% -4.8% -4.9% -6.1% -5.9% -5.6% -4.8% -5.6% -3.7%
% growth year-to-year 105.2% 39.5% 1.4% -12.8% 56.8% 297.4% 299.2% 106.5% 129.8% 58.0% -3.1% 43.1% 44.8% -14.6%
Interest Income 0.3 0.3 0.2 0.0 0.0 0.2 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.4
% of Revenue 0.0% 1.5% 1.2% 0.5% 0.3% 0.8% 3.5% 0.6% 1.1% 0.6% 0.0% 0.0% 0.0% 0.1% 0.9%
% growth year-to-year #DIV/0! 21.0% -42.5% -17.5% -1.6% 110.7% 26.1% 49.2% 69.5% -100.0% -100.0% -100.0% -83.7% 744.7%
Other Income (Expense) 0.4 0.2 0.1 2.2 0.0 0.1 0.0 0.0 0.1 (0.3) 0.0 0.0 0.0 (0.3) 0.4
% of Revenue 3.1% 1.1% 0.4% 5.9% -85.3% 2.5% 0.3% 0.3% 0.3% -1672.2% 0.0% 0.0% 0.0% -0.8% 1.0%
% growth year-to-year -47.5% -42.8% 1795.9% -85.3% -10.9% -96.6% -98.5% -96.8% -1672.2% -100.0% -100.0% -100.0% -476.3% -266.9%
Income Before Taxes 0.8 (0.3) (2.8) 10.2 2.7 (3.1) (5.7) (0.0) (6.1) 0.9 0.3 0.5 0.9 2.2 6.9
% of Revenue 6.2% -1.6% -9.5% 27.7% 29.0% -59.8% -112.8% -0.3% -23.2% 11.2% 3.3% 6.4% 9.2% 6.4% 15.9%
% growth year-to-year -137.8% 849.7% -465.0% 28.3% -317.3% -265.9% -100.5% -160.5% -68.4% -108.2% -109.5% ####### -135.1% 219.3%
Minority interest in subsidiary (0.1) (1.2) (2.8) (5.0) (1.6) (0.0) 0.7 (0.8) (1.8) (1.1) 0.0 0.0 0.0 (1.1) 0.0
% of Revenue -6.2% -9.7% -13.7% -17.5% -1% 14% -12% -6.9% -14.5% 0.0% 0.0% 0.0% -3.3% 0.0%
% growth year-to-year
Income Taxes (0.0) (0.1) (0.2) (0.1) (0.0) (0.1) (0.0) (0.0) (0.1) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0)
Tax Rate % -0.6% -0.5% -1.2% -0.1% -1.0% -0.4% -0.2% 1.5% -0.1% 0.4% 0.4% 0.4% -0.5% -0.4%
Net Income 0.7 (1.6) (5.8) 5.0 1.0 (3.3) (5.0) (0.9) (8.2) (0.3) 0.3 0.5 0.9 1.4 6.8

Dividend required for preferred stockholders (0.2) (0.2) (0.0) (0.0) (0.0) (0.0) (0.1)
Net Earnigs per Share 0.04 (0.11) (0.33) 0.19 0.04 (0.12) (0.19) (0.03) (0.30) (0.01) 0.01 0.02 0.03 0.04 0.22
% growth year-to-year 209.8% -156.0% -1.2% -422.1% -400.9% -164.9% -263.8% -122.9% -106.8% -108.9% -189.0% -114.8% 383.5%
Weighted Avg. S/O (mil)-fd 14.8 14.6 18.2 26.0 28.0 27.4 26.6 28.7 26.9 31.6 31.6 31.6 31.6 31.6 31.6
EBITDA 3.0 2.8 5.6 10.5 2.2 -1.8 -3.2 0.6 -2.3 2.2 1.7 2.0 2.4 8.3 11.7
% of Revenue 24.5% 14.8% 19.0% 28.8% 23.2% -34.0% -64.2% 8.2% -8.7% 28.3% 22.0% 24.0% 24.5% 24.6% 27.1%
% growth year-to-year 101.5% -10.4% -26.6% -179.6% -225.7% -79.9% -121.8% -0.1% -197.1% -162.5% 324.3% -460.9% 41.1%
Depreciation & Amortization 2.0 3.0 2.6 3.3 1.0 1.0 1.0 1.1 4.2 1.0 1.0 1.0 1.0 4.0 4.0
% of Revenue 15.9% 16.2% 9.0% 9.1% 11.1% 19.5% 20.6% 16.0% 15.8% 13.3% 12.8% 12.0% 10.4% 12.0% 9.4%
% growth year-to-year -12.5% 26.4% 42.6% 28.4% 29.2% 9.6% 318.8% -2.0% -1.6% -2.2% -7.8% 268.9% 300.0%

RODMAN & RENSHAW EQUITY RESEARCH 3

Netsol Tech Inc December 21, 2009

RODMAN & RENSHAW RATING SYSTEM: Rodman & Renshaw employs a three tier rating system for evaluating both the potential
return and risk associated with owning common equity shares of rated firms. The expected return of any given equity is measured on a
RELATIVE basis of other companies in the same sector, as defined by First Call. The price objective is calculated to estimate the potential
movement in price a given equity could achieve given certain targets are met over a defined time horizon. Price objectives are subject to
exogenous factors including industry events and market volatility. The risk assessment evaluates the company specific risk and accounts
for the following factors, maturity of market, maturity of technology, maturity of firm, cash utilization, and valuation considerations.
Potential factors contributing to risk: relatively undefined market, new technologies, immature firm, high cash burn rates, intrinsic value
weighted toward future earnings or events.

RETURN ASSESSMENT
● Market Outperform (Buy): The common stock of the company is expected to outperform a passive index comprised of all the common
stock of companies within the same sector, as defined by First Call.
● Market Perform (Hold): The common stock of the company is expected to mimic the performance of a passive index comprised of all
the common stock of companies within the same sector, as defined by First Call.
● Market Underperform (Sell): The common stock of the company is expected to underperform a passive index comprised of all the
common stock of companies within the same sector, as defined by First Call.
RISK ASSESSMENT
● Speculative - The common stock risk level is significantly greater than market risk. The stock price of these equities is exceptionally
volatile.
● Aggressive - The common stock risk level is materially higher than market level risk. The stock price is typically more volatile than the
general market.
● Moderate - The common stock is moderately risky, or equivalent to stock market risk. The stock price volatility is typically in-line with
movements in the general market.

Rating and Price Target History for: Netsol Tech Inc (NTWK) as of 12-18-2009

09/18/08 11/14/08 05/12/09 10/19/09

I:MO:$6 MO:$4 MO:$2 MO:$2.5

0
Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3
2007 2008 2009

Created by BlueMatrix

RATING SUMMARY
Distribution of Ratings Table
IB Serv./Past 12 Mos
Rating Count Percent Count Percent
Market Outperform(MO) 107 74.30% 27 25.23%
Market Perform(MP) 31 21.50% 5 16.13%
Market Underperform(MU) 3 2.10% 0 0.00%
Under Review(UR) 3 2.10% 0 0.00%
Total 144 100% 32 100%

Investment Banking Services include, but are not limited to, acting as a manager/co-manager in the underwriting or placement of
RODMAN & RENSHAW EQUITY RESEARCH 4
Netsol Tech Inc December 21, 2009

securities, acting as financial advisor, and/or providing corporate finance or capital markets-related services to a company or one of its
affiliates or subsidiaries within the past 12 months.

ADDITIONAL DISCLOSURES
Rodman & Renshaw, LLC. (the "Firm") is a member of FINRA and SIPC and a registered U.S. Broker-Dealer.

ANALYST CERTIFICATION
I, Joe Giamichael, hereby certify that the views expressed in this research report accurately reflect my personal views about the subject
company(ies) and its (their) securities.
None of the research analysts or the research analyst's household has a financial interest in the securities of Netsol Tech Inc (including,
without limitation, any option, right, warrant, future, long or short position).

As of Nov 30 2009 neither the Firm nor its affiliates beneficially own 1% or more of any class of common equity securities of Netsol Tech
Inc.

Neither the research analyst nor the Firm has any material conflict of interest with Netsol Tech Inc, of which the research analyst knows or
has reason to know at the time of publication of this research report.
The research analyst principally responsible for preparation of the report does not receive compensation that is based upon any specific
investment banking services or transaction but is compensated based on factors including total revenue and profitability of the Firm, a
substantial portion of which is derived from investment banking services.
The Firm or its affiliates did not receive compensation from Netsol Tech Inc for any investment banking services within twelve months
before, but intends to seek compensation from the companies mentioned in this report for investment banking services within three
months, following publication of the research report.

Neither the research analyst nor any member of the research analyst's household nor the Firm serves as an officer, director or advisory
board member of Netsol Tech Inc.

The Firm does make a market in Netsol Tech Inc securities as of the date of this research report.

Any opinions expressed herein are statements of our judgment as of the date of publication and are subject to change without notice.
Reproduction without written permission is prohibited. The intraday prices of securities mentioned in this report are as of Dec 21 2009.
Additional information is available to clients upon written request. For complete research report on Netsol Tech Inc, please call (212)
356-0500.
Readers are advised that this analysis report is issued solely for informational purposes and is not to be construed as an offer to sell or
the solicitation of an offer to buy. The information contained herein is based on sources which we believe to be reliable but is not
guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. Past performance
is no guarantee of future results.

RODMAN & RENSHAW EQUITY RESEARCH 5