Legend has it that a Sage was visited by a king named Rukmangada and during the visit the his wife Mukunda expressed her attraction to the king,Rukmangada .The king turned her down leaving her seeting in anger. In the meanwhile, Indra, the king of the Devas came down to the earth in the disguise of Rukmangada and accepted her amorous moves. An illegitimate son Grutshmadha was born out of their union.

The son, learning of the story of his birth felt very sad and prayed to Ganesha in Bhadrakavana for absolvement of the sins of everyone concerned. His prayers were granted by Varadavinayak. Varadavinayak is portrayed, seated on an east facing throne. Stone images of his consorts Siddhi and Riddhi are also seen in the temple. A lamp in this temple is said to have been glowing uninterrupted for over a hundred years.