Wash the rice and soak overnight. Grind the rice into a thick paste with toddy. Grind the grated coconut too into a fine paste using toddy.
Mix the coconute paste with the ground rice and pour in the toddy to make a thick batter. Add the salt and sugar. Cover tightly and store in a warm place for 2 hours or until the mixture is doubled in volume.
Put in idli moulds or small bowls and steam in the cooker for 15-20 minutes or till firm.