Once the great seers like Sanaka lived on the banks of this lake Arunthathi, wife of one of the seven great seers, found this spot very vibrant. She chose this spot for performing penance. On a Full Moon day in the Palguni Month (March - April) Sri Lakshmi Devi appeared to Arunthathi and granted her wishes. Sri Lakshmi Devi also granted a power that on the said Palguni day every year whosoever takes bathe in that lake shall get the grace of Sri Lakshmi Devi.
Later Sri Agasthya built his hermitage on the banks and raised a flower garden around the spot. The flowers were also offered to the Lord in the shrine by the sage.