In Active Roles 7.4, there is an option to create Azure Group during on-prem Group.
The following or similar error can be seen in the Active Roles event log:
This issue only occurs if the Azure Tenant type is Federated or Synchronized as this type of Azure Group creation is not supported via Graph.
Non-Federated Tenant type presents no issues. Azure Group creation is supported via Non-Federated Tenant.
The options for Azure Group creation will be resolved in a future release of Active Roles.