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LONDON -- In a continuing attempt to emulate the success of Indian information-technology companies, Pakistan-linked

NetSol International

(NTWK) - Get Free Report

will announce on Wednesday that it has acquired German Internet service provider

SuperNet AG

in an all-stock deal worth $20 million, according to sources close to the deal.

The acquisition forms part of NetSol's strategy to offer software services at a cheaper price than its rivals by leveraging its large pool of relatively cheap labor resources in Lahore, Pakistan, in much the same way Indian companies such as


(INFY) - Get Free Report

are doing.

The acquisition of SuperNet will be made by NetSol's e-commerce arm,

NetSol eR

, which was created in January to target three segments of the market: connectivity, technology, and e-commerce and content. SuperNet provides Internet solutions such as e-commerce strategies and Web-design services to around 25,000 customers in Germany. SuperNet will now farm out the development work for its clients to NetSol's facilities in Pakistan.

Although NetSol is concentrating particularly on Asia, it also is looking at areas it believes are underdeveloped which, strange as it may sound, include Germany.

"There are a lot of players in Germany, but few are providing the value-added services, the Internet solutions," says the source. "What NetSol can do is cost these services, which are much in demand in Germany, in rupees, and charge in dollars."

These low-cost solutions have enabled NetSol to garner a number of high-profile clients, including

Toyota Finance


BMW Finance


Volvo Finance


Chrysler Finance Taiwan


Mercedes-Benz Finance Leasing Thailand


Such high margins have inevitably helped push NetSol's stock price, which has soared since it listed on Nasdaq in January.

Alas, NetSol has not been spared the volatility that has plagued such companies over the past few months, and on Tuesday, the shares closed down 5 1/2, or 10.8%, at 45 1/2, after peaking in February at 80.

"I know there is this volatility, but even so, I think this is an unrecognized and undervalued company," says Jonathan Iseson, who runs the hedge fund

Blue Water Partners

and is long NetSol.

Certainly, NetSol is ignored compared with its Indian counterparts, which receive a lot of attention from the brokerages. That is unsurprising, however, when one considers that Infosys had revenue of $121 million last year, compared with NetSol's $3 million.

Nevertheless, Iseson projects NetSol's revenue to grow to between $15 and $20 million this year. "It's so simple, the cost and the quality that NetSol can provide these services is such that companies like CFS just ... farm out all their work to them."

The U.K.'s

CFS Group

, a software-solution supplier to the asset-based leasing and lending industry, signed an agreement last month to outsource all of its software-development needs to NetSol, and CFS will be the sole distributor of Netsol's leasing and finance products worldwide.

Most, if not all, the undervaluation of NetSol compared with the Indian IT companies is attributed to Pakistan's somewhat dubious political situation, analysts say. The democratically elected government was overthrown in a coup last year.

Yet that hasn't stopped the Pakistani government's efforts to push the country's potential as an IT center. The current minister for science and technology recently visited the U.S. and the U.K. in an attempt to persuade foreign IT companies to invest in the country. With yet another acquisition on its books, NetSol is certainly doing its part in all of this.