A ship was intercepted just off the Mumbai coast at midnight on Wednesday, and five people on board arrested, after intelligence alerts warned of "suspicious" cargo.
The ship was headed to Mumbai from Dubai.
Intelligence alerts warned the Coast Guard that the crew was using a Thuraya satellite phone to communicate with handlers in Dubai and India. Thuraya is a mobile satellite services phone company based in the UAE. Its sat phones were banned in India in 2010 over concerns that they could be misused by terrorists.
When the Coast Guard officials stepped on board 'MSV Yusufi', the crew threw its satellite phone overboard.
"The Coast Guard and Navy had deployed ships and aircraft for enhanced patrol that resulted in an interception of the dhow," the Coast Guard said in a statement. "The crew was reportedly in touch with one Mr Usman at Dubai for whom the goods were being brought.
Nearly 30 goats were found on the ship.
Officials suspect the ship was bringing in a large quantity of drugs.