Hi @Hamza Khalid
Thank you for reaching Microsoft Q&A Forum!
Based on your requirement, I understand that the issue has occured due to claims exchange where you have choosen AAD-UserReadUsingAlternativeSecurityId which actually look up for a social directory. Whereas AAD-UserReadUsingObjectId picks both local or social account which helps in your scenario to pick the pre created Azure AD B2C users.
Please try the below technical profile in your custom policy and if you are able to pick pre-created B2C users up automatically.
<!-- For social IDP authentication, attempt to find the user account in the directory. -->
<OrchestrationStep Order="6" Type="ClaimsExchange">
<Preconditions>
<Precondition Type="ClaimEquals" ExecuteActionsIf="true">
<Value>authenticationSource</Value>
<Value>localAccountAuthentication</Value>
<Action>SkipThisOrchestrationStep</Action>
</Precondition>
</Preconditions>
<ClaimsExchanges>
<ClaimsExchange Id="AAD-UserReadUsingObjectId" TechnicalProfileReferenceId="AAD-UserReadUsingObjectId" />
</ClaimsExchanges>
You can refer below document for more details on AAD-Common technical profile: Microsoft Entra technical profile in an Azure Active Directory B2C custom policy
I hope this information is helpful. Please feel free to reach out if you have any further questions.