I managed to achieve this using DiskGenius free tool. I created Azure Managed Data Disk with the intended performance and size and attached it to the VM as a Data Disk. I then RDP to the VM and installed DiskGenius and used this tool to migrate OS C Drive to the Data Disk (or clone disk). Then, I Disconnected the Data Disk (after cloning) from the VM, and then I used PowerShell 4 command lines to swap the OS disk.
https://azure.microsoft.com/en-ca/blog/os-disk-swap-managed-disks/
$vm = Get-AzureRmVM -ResourceGroupName osrg -Name vm2
$disk = Get-AzureRmDisk -ResourceGroupName osrg -Name osbackup
Set-AzureRmVMOSDisk -VM $vm -ManagedDiskId $disk.Id -Name $disk.Name
Update-AzureRmVM -ResourceGroupName osrg -VM $vm
It worked ...