You are absolutely right. Market values companies having 20% ROE with high PE. But most of those companies will have D/E ratio less than 0.5 or 0.6 (of course few exceptions are there).
For powergrid, debt to equity ratio is 2 and also PSU.
There would be a point when powergrid sets up
- transmission network to cater the current transmission demand and
- transmission network to cater future demand (say 3 to 5 years) from above point of time,
when above 2 are satisfied, this would lead to no new debt and it is just maintenance of existing networks which would be negligible cost. Major debt reduction would start here. The question is when this would happen 
In my understanding, as and when the debt reduces, market would start re-rating power grid and as we all know market will sense this much ahead…
Disc: invested and one of my largest holding.,… may be biased…Not a buy or sell recommendation … (latest position size here here )