The police has seized two cars, one bike, Rs 6,500 in cash and mobiles phones from the gang.
A 50-year-old businessman, who was abducted for a ransom of Rs 5 lakh by his friend, was rescued from a house in Chodavaram in the district on Monday night, police said.
Real estate businessman P Lova Raju was kidnapped from Narsipatnam when he went there for a business deal on February 17.
The kidnappers demanded a ransom of Rs five lakhs for his release, said police.
Based on the complaint from Mr Raju's brother-in-law Ch Pydikonda, Chodavaram police rescued Mr Raju Monday night and arrested seven persons.
Mr Raju's friend Y Jagga Rao hatched a plan to kidnap him for a ransom. On February 17, he made a phone call to Mr Raju and invited him to Narsipatnam for a real-estate deal, said police.
Believing the words of Mr Rao, Mr Raju went there to see a piece of land but was kidnapped and taken to Chodavaram where he was held hostage in a room, said police.
The kidnappers later made a phone call to Mr Raju's brother-in-law Ch Pydikonda and demanded Rs five lakh ransom for his release.
Pydikonda, who met two of the kidnappers on February 18 to inform that he could manage to give only Rs 2.5 lakh, clicked their photos secretly and later approached the police.
The cops also seized two cars, one bike, Rs 6,500 in cash and mobiles phones from the gang, police said.