Azure API Management find-and-replace not working for URLs

The policies which you have used is correct even I have tried. I have an another approach use a custom script policy to replace the internal URL with the masked URL in the OData service response:

<outbound>
    <base />
    <set-body template="liquid">
        @{
            var response = context.Response.Body.As<string>();
            var modifiedResponse = response.Replace("http://xxxxx.sap-internal.company.cloud", "http://xxxxapim.azure-api.net");
            return modifiedResponse;
        }
    </set-body>
</outbound>

• This template="liquid" allows you to use a script inside the @{} block. The script retrieves the response body, replaces the internal URL with the masked URL using the Replace method, and returns the modified response.

I had a sample API to get register in APIM and tried that which you had given in the above to mask the internal URL returned by an some ex-service in Azure API Management.

I have redirect by using a function app and tried to mask the internal URL exposed.

#r "Microsoft.AspNetCore.Http"

using System.Net;
using Microsoft.AspNetCore.Http;
using Microsoft.Extensions.Logging;

public static async Task<HttpResponseMessage> Run(HttpRequest req, ILogger log)
{
    // Call the OData service and retrieve the response
    // ...

    // Create a new response message
    var response = new HttpResponseMessage(HttpStatusCode.OK);

    // Modify the response using policies
    response.Headers.Add("New-Header", "Value");

    // Replace the internal URL in the response body with the masked URL
    var responseBody = await response.Content.ReadAsStringAsync();
    responseBody = responseBody.Replace("http://demo.sap-internal.company.cloud", "http://demoapim.azure-api.net");
    response.Content = new StringContent(responseBody, Encoding.UTF8, "application/json");

    // Return the modified response
    return response;
}

Output:

Response of the Replaced URL.