Acting on a tip-off, sleuths of Commissioner's Task Force (North Zone) apprehended Maddi Madhusudhan Reddy and Gandikota Ramesh when they were trying to deliver the explosives illegally, they said.
Police seized a car in which the cache was being transported, besides Rs 7,000 in cash and some documents.
Police said Reddy's firm Mahalaxmi Enterprises used to supply explosives to construction and quarrying sites.
The firm has legal license issued by the office of Chief Controller of Explosives, Nagpur, they said.
Reddy, however, soon took to illegal selling of the explosives to quarrying sites. "He used to sell the material mainly to quarry operators," a senior police officer said.
As per the license terms, the blasting material can not be sold in open market.
According to police, another accused Ramesh, a stone cutter, used to earn commission as a middleman by liaising with Reddy and quarry operators who used to purchase explosives.
Police are now trying to establish identity of those who bought explosives from Reddy as there is a possibility that the blasting material might have fallen into the hands of anti-social elements.
Police said they will write to the Chief Controller of Explosives to cancel Reddy's license for violation of norms.