Microbial exopolysaccharides (EPSs) are highly heterogeneous polymers produced by fungi and bacteria that have garnered considerable attention and have remarkable potential in various fields, including biomedical research. The necessity of biocompatible materials to coat and stabilize nanoparticles is highly recommended for successful application of the same in biomedical regime. In our study we have coated magnetic nanoparticles (MNPs) with two bacterial EPS-mauran (MR) and gellan gum (GG). The biocompatibility of EPS coated MNPs was enhanced and we have made it multifunctional by attaching targeting moiety, folate and with encapsulation of a potent anticancerous drug, 5FU. We have conjugated an imaging moiety along with nanocomposite to study the effective uptake of nanoparticles. It was also observed that the dye labeled folate targeted nanoparticles could effectively enter into cancer cells and the fate of nanoparticles was tracked with Lysotracker. The biocompatibility of EPS coated MNPs and synergistic effect of magnetic hyperthermia and drug for enhanced antiproliferation of cancer cells was also evaluated. More than 80% of cancer cells was killed within a period of 60 min when magnetic hyperthermia (MHT) was applied along with drug loaded EPS coated MNPs, thus signifying the combined effect of drug loaded MNPs and MHT. Our results suggests that MR and GG coated MNPs exhibited excellent biocompatibility with low cell cytotoxicity, high therapeutic potential, and superparamagnetic behavior that can be employed as prospective candidates for bacterial EPS based targeted drug delivery, cancer cell imaging and for MHT for killing cancer cells within short period of time.