Soak the rice in water overnight or for at least 6 hours.
Drain the water and grind the rice with grated coconut and water to a fine batter.
Dissolve yeast in a little water, add sugar, and mix well.
Mix the yeast mixture into the rice batter and add salt to taste.
Leave the batter to ferment in a warm place for 6-8 hours or overnight, until it becomes bubbly.
Heat the appachatti or appam pan on a medium flame.
Pour a ladleful of batter into the pan and swirl it around to form a thin layer of batter around the edges and a thick layer in the center.
Cover the pan with a lid and cook the appam for 2-3 minutes until the edges turn golden brown and crispy and the center is soft and fluffy.
Serve hot with coconut chutney, vegetable stew, or egg roast.