Hello aniket,
Merge Tie Points option requires key points to be present in the chunks that you are planning to merge. With this option enabled Metashape is trying to find the corresponding tie points between the chunks, i.e the tie points found in different chunks but considered to be identical would be merged to the single tie point instance in the merged chunk. Note that chunk merging operation with "merge tie points" option enabled the processing time will be increased considerably.