The princely states and other territories were supposed to be given a choice: to join India, Pakistan, or become independent. But this promise was broken. Those opting for independence were denied, they were all forced to join either India or Pakistan.
Muslim Hyderabad was the last holdout (except for Christian Nagaland, which also declared its independence, and where armed resistance continues to this day). Hyderabad was the largest and richest of the princely states, but unfortunately for its Nizam and his people, the state was an enclave, completely surrounded by (predominately) Hindu India, an untenable position. Operation Polo, the first post-independence action of the Indian armed forces, crushed Hyderabad resistance, and it was absorbed into India.
The fabulously wealthy Nizam of Hyderabad would have done better to have spent some of his money on warplanes. The Indian air force had uncontested air superiority from the first day.
However, I can see the Indians' point: they felt threatened by the existence of a sovereign Muslim territory in the heart of their country. War with Pakistan was already looming; they probably felt they could expect an attack from within, if they failed to end Hyderabad independence. And given the rise in Islamist terrorism, Hyderabad, had it survived as an independent entity, might have become a base for mujahideen attacks against India.