Aug. 26 (Bloomberg) -- Two bombs exploded in the southern Indian city of Hyderabad late yesterday, killing 40 people and injuring another 50. The state's chief minister said the attackers were linked to overseas terrorist groups.

One bomb blew up at a street-side restaurant in the Kothi area of the city, the capital of the state of Andhra Pradesh, while the other rocked an open-air auditorium in the Lumbini Park area, Jeevan Reddy, state minister for roads and buildings, said today in a telephone interview.

``Available information points out that terrorist organizations from Bangladesh and Pakistan are behind it,'' Chief Minister Y.S. Rajasekhara Reddy said in a televised briefing today. ``Most of the time, the external terrorist organizations are responsible for'' such attacks. He didn't elaborate, beyond saying that no arrests had been made.

Police defused a third bomb, set to explode at 10:35 p.m. local time yesterday, about three hours after the two blasts, Reddy said after a cabinet meeting in Hyderabad. The roads minister previously said two bombs had been defused.

``This is a terror plot, this is a terror attack,'' Hyderabad's Police Commissioner Balwinder Singh said in a telephone interview. ``But the situation is now under control.''

Muslim Population

Hyderabad has a large Muslim population among its 6.5 million residents. A bomb at a mosque on May 18 killed 11 people when it exploded during Friday afternoon prayers.

The Press Trust of India put the toll at 42 dead, citing police. The restaurant death toll was 32 and the fatalities at the open-air auditorium, where a laser show was going on, totaled 10, PTI said.

The chief minister appealed to people not to believe or propagate rumors and announced compensation payments of 500,000 ($12,000) rupees for the next of kin of those who died. Reddy also pledged a government job to those families that had lost their breadwinner.

Television pictures showed blue fiberglass chairs, plastic bags, blood-splattered clothes and shoes strewn around the seating area at Lumbini Park.

The front of the restaurant, which sells spicy snacks, was ripped apart by the blast. Television images showed police and medical volunteers cordoning off the entrance to city hospitals, where the injured were being taken.

Software Hub

Hyderabad has sought to build itself as a rival to Bangalore as India's software and services-outsourcing hub, and is the headquarters of Dr. Reddy's Laboratories Ltd., the country's largest drugmaker by sales, and Satyam Computer Services Ltd., its fourth-biggest computer-software exporter.

Tensions between India's majority Hindus and its Muslim minority often flare into violence and are mirrored by the rivalry between India and neighboring Pakistan, which were both ruled by Britain until independence in 1947.

An almost two-decade-old insurgency in Jammu and Kashmir, India's only Muslim-majority state, has left at least 50,000 people dead. India has accused Pakistan of supporting the insurgency, a charge Pakistan denies.

``We have to stand united, regardless of what religion we are,'' Asaduddin Owaisi, a member of Parliament from Hyderabad who belongs to the All India Majlis-e Ittihad al-Muslimin, which represents Muslims, said in a televised interview.

More should have been done to investigate the Mecca Masjid explosion of May 18, Owaisi said.

Explosions on commuter trains and at railway stations in Mumbai, India's financial capital, on July 11 last year left 184 people dead. The explosions, the worst attack in 13 years, caused the 44-month-old peace process between India and Pakistan to break down, an initiative that resumed in November.

In other attacks, 65 people died on Feb. 19 when two bombs exploded on an Indian train near the Pakistan border. Last September, explosions near a mosque in the western town of Malegaon in Maharashtra left 31 people dead.

To contact the reporters on this story: Ashok Bhattacharjee in New Delhi at ashokb@bloomberg.net; Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net.

Last Updated: August 26, 2007 03:12 EDT