Hi @Somen Ghosh
Thank you for reaching out to the Microsoft Q&A platform.
Yes, the Microsoft Azure Recovery Services (MARS) agent supports back up/restore of VHD and MS SQL running files (.mdf, .ldf) on an on-premises physical server. Please note that the MARS agent must have access to the required certificates to access the encrypted files.
Also, the volume must be local on the server an;d the volume must be unlocked before the backup starts.
Here is the support matrix link for MARS agent :https://learn.microsoft.com/en-us/azure/backup/backup-support-matrix-mars-agent
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