This is the first time an intelligence agency has established a link between the two banned groups.
The report says that early this year leaders of the two organisations held two meetings -- in Bengaluru and Hyderabad -- to strike an alliance.
After discussions, the two outfits decided to create a joint base in south India, the report said, adding that while they would step up recruitment, the base would operate out of Kerala.
Though the Maoists have always supported the Kashmir insurgency, and have raised their voice against what they call the 'persecution of Muslims in India', till now there has never been concrete evidence of any linkages with Islamic terror groups.
The IB report say the first signs of a link were in Kerala, where SIMI had a strong base before it was banned and the Maoists are also present in sizeable numbers.
The IB report claims that several Maoist leaders and cadre took shelter in Kerala with the help of SIMI.
Last year, nearly 500 Maoists underwent training under the SIMI in the Vagamon hills on the Idukki-Kottayam border, IB sources said. This information is bound to worry the security forces that are planning to storm Chhattisgarh's Abujmaad forests, the de facto headquarters of the Maoists. Special forces have been trained in jungle warfare to take on the Maoists in their stronghold.
The Maoist cadre were imparted commando training and some were even asked to train with SIMI's suicide squads, the IB report says.
SIMI's leader, Safdar Nagori, who is now in police custody in Madhya Pradesh, confirmed this fact, sources added.
Following several serial blasts across the country, the SIMI anticipated that it would face tremendous heat from the security agencies. They also knew that their cause of destabilising India could be furthered if they tied up with the Maoists, sources said.
Similarly, the Maoists are always open to make strategic alliances which will aid them achieve their ultimate goal. Known as Strategic United Front, the Maoists say that it is one of the three 'magic weapons' that will help them reach their goal (The other two are the party and the army).
Sources said that more importantly, the Maoists were aware that SIMI could impart commando training since most of its cadres were already trained in this type of warfare.
Last year, when the government renewed the ban on SIMI, the Maoists condemned it. Its central committee spokesperson Azad said, "This reiterates the government's policy to continue its brutal war on Muslims."
Around the same time, Azad also condemned what he called the 'double standards of the Indian ruling classes in Kashmir.' He called upon the Kashmiri Muslims to 'fight back Hindu fascist forces and Indian expansionists.'
The Maoists have been traditionally calling the insurgency in the Valley as a 'nationalist struggle' and talked about it in the same breath as the movements in India's northeast and the Liberation Tigers of Tamil Elam's fight against the Sri Lankan army.
What should be more worrying to the Centre and the security forces is the fact that the Maoists are adept at forming strategic and tactical alliances with any group that might help them achieve their ultimate goal.
"If at all the Maoists are looking for a linkage with the SIMI, or whatever remains of it, it should be understood considering the following points: First, it is an attempt to win over the support of the Muslim community and thus broaden their base. Second, they are trying to make common cause with SIMI, as both are banned outfits. Third and most important is the Maoist strategy of making common cause with any outfit that opposes the Indian state either through peaceful means or violence," a security expert said.
However, till now, there has been no known instance where the Maoists had colluded with religious fundamentalists in any major operation.
In another crucial development in this context, CPI-Maoist general secretary, Ganapati, recently said only the Maoist leadership can provide anti-imperialist orientation and achieve class unity among Muslims.
"Islamic jihadist movements of today are a product of imperialist -- particularly the US imperialist -- aggression and the suppression of the oil-rich Islamic and Arab countries and the persecution of the entire Muslim religious community," Ganapati had said.
"Atrocities on the Muslims have reached horrendous proportions unheard of since the persecution of the Jews under Hitler. It is only the Maoist leadership that can provide correct anti-imperialist orientation and achieve class unity among the Muslims as well as the people of other religious persuasions," he had said.